MUMBAI (Commoditiescontrol) - U.S. July cotton dropped over 2% during the week amid profit booking weighed by disappointed supply-demand report released by USDA. Cotton prices earlier on Monday reached to 88.08 cents a lb, its highest since May 2014. The contract during the week traded within range of 83.50-88.08 cents per lb. Total net export sales were a tad down week-on-week with speculators continued to bet on bullish side this week as well.
April 7 (Monday): The most active ICE cotton contract for July expiry ended down 0.91 cent, or 1.05 percent, at 85.99 cents per lb as traders locked in profits after prices hit four year highs on fears of unavailability of quality U.S. cotton for delivery.
April 8 (Tuesday): Benchmark July cotton futures settled down 0.61 cent, or 0.71 percent, at 85.38 cents per lb amid a stronger dollar as traders adjusted their positions ahead of the U.S. supply, demand report on Thursday.
April 9 (Wednesday): The most active July cotton contract closed 0.48 cent, or 0.56 percent lower, at 85.86 cents per lb ahead of the U.S. supply, demand report and export sales data on Thursday.
April 10 (Thursday): July cotton fell 1.3 cent, or 1.51 percent, at 84.56 cents per lb, touched lowest level in two-weeks as markets were disappointed by the U.S. exports forecast for the 2018-19 crop from a supply-and-demand report.
April 11 (Friday): The most active July cotton contract for July expiry settled up 0.06 cent, or 0.1 percent, at 84.62 cents per lb after the demand outlook from the United States Department of Agriculture on Thursday disappointed investors.
USDA SUPPLY-DEMAND REPORT HIGHLIGHT
2017-18 US cotton crop lowered by 1.1 lakh bales (480lb each) to 20.92 million bales but raised export prospect by 5 lakh bales to 15.50 million bales resulting U.S ending stock to contract at 4.7 million bales from 5.3 million projected a month earlier. Global ending stock mostly unchanged at 88.21 million against 88.29 million bales in April.
The agency has revealed first look for 2018-19 supply-demand, which showed that world mill use will surged to new record level at 125.44 million bales (previous record was 123.8 million set in 2006-2007).
Rest of the world (ROW) ending stocks are expected to rise from 47.51 million bales at the end this season to 50.33 million in 2018-19. This is mainly because of expectations that China will release continue to liquidate its cotton from state reserve.
According to experts, “The potential rise in ROW ending stock is the most bearish element in WASDE report.”
.png) ON CALL SALES
On-call sales position (Where mills purchase bales on-call but do not fix prices and in turn sellers/merchants, hedge themselves creating a short position on the futures market), as on May 4 rose 2.25% at 16.37 million bales against 16 million bales last week, breaking this season's record high of 16.06 million bales on March 15.
The on-call sales in July contract tad down at 5.51 million bales versus 5.55 million bales prior week, and the increase in open interest suggests that no progress has been made this week either. Interestingly mills have not reduced positions and seems to have opted wait and watch approach with hope for something to get them out of trouble. New positions have been added in December contract by 3.01% at 3.85 million bales.
The market is mainly focusing on July on-call sales, while no significant reduction in position has been noticed, indicating that mills are optimistic and hence giving some more time for themselves to get rid of positions as they are waiting for speculators to blink first.
However, time is running tick and fast since there are only about 5 weeks left to get all these fixations and other short positions squared away.
The mills opting to hold shorts positions for a week or two with anticipation that speculators will give up first, but it is very difficult time as fundamentals are little on bullish side with dry weather in Texas following strong demand for U.S cotton.
WEEKLY EXPORT SALES
The total net sales during the week ended May 3 stood slightly lower by 2% at 196,413 running bales, but shipment continued to accelerate as it rose 17% week-on-week at 520,867 running bales. cancellation were on the lower side at 19,800 running bales compared with 51,000 bales a week ago.
The total comittment for the season 2017-18 (Aug-Jul) reached at 114%, while total shipment stood at 73% or 6.11 million bales (480lb each). The shipments will need to average around 264,000 running bales in order to reach at USDA's target of 15 million bales.
CFTC
The CFTC report, dated May 8, showed Money managed players increasing their position by nearly 10%, over the week, to 97,865 lots from previous week at 89,012 lots. On the other hand, the trade shorts rose over 8% to 194,366 lots.
.png)
TECHNICAL IDEAS - ICE JULY COTTON (WEEKLY)
Further rise can continue above 88.10 closing. Traders long and holding the same can use rise to 85.4-87.3-88.10 to exit long and take profits.
Re-enter long if close is above 88.10.
.png)
CONCLUSION
U.S cotton during the week sheds 2% and any more correction ahead will certainly breach the few important support level, triggering stop losses in bullish position, but any good downside will certainly prompt mills to fix in falling market, which may act as supportive factor for ICE futures preventing any sharp downside at least in the near term. Lets have finger cross as some roller coaster ride (volatile trade) expected next few weeks.
(By Commoditiescontrol Bureau; +91-22-40015533)
|
0 Comments 
Post Comment 
