MUMBAI (Commoditiescontrol) – ICE cotton futures edged up this week with traded in tight range of 86.10 to 88.59 cents per pound in dull volume trade as both bulls and bears continued to hold their positions with neither of them ready to blink first amid seesaw fundamentals. Dry weather in Texas with prospects of higher abandonment followed by 12 billion dollars aid to farmers and positive trade talks between the US and EU provided reasons for bulls to wait, whereas trade shorts are holding with anticipation that the ongoing trade war may result in global economic slowdown.
The most-active December cotton futures on ICE exchange gained this week (Jul 23-27) by 1.44%, or 1.26 cents to 88.34 cents per pound. The contract during the week hovered between 86.10 to 88.59 cents per pound.
Futures volume remained thin throughout the week. It was at 9,008 lots on Friday’s trade against 11,222 lots a day before, while open interest was down at 171,987 lots versus 172,417 lots on previous session. Looking at pace of volume it can be easily examined that market activity was less with many players opting to stay on the sideline rather than creating positions. At the same time, open interest also didn’t provide any clear cues as price was moving in tight range.
The average daily trading volume of all cotton contracts continued to be lacklustre at just over 14,875, while open interest of 259,771 was just marginally higher than a week ago.
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WEATHER IN WEST TEXAS
West Texas witnessed mostly dry weather with just a few light showers. Temperatures remained near to below normal.
WEATHER FORECAST
Dry conditions or just a few light showers Thursday. Dry weather Friday-Saturday. Dry conditions or just a few light showers Sunday. Scattered showers and thunderstorms Monday. Dry weather Tuesday-Wednesday. Temperatures variable Thursday, near to below normal Friday, above normal Saturday, variable Sunday, below normal Monday, near to below normal Tuesday, near to above normal Wednesday.
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US WEEKLY EXPORT SALES
U.S. weekly export sales of cotton for the week ended July 19 dropped 41% week-on-week at 8,141 Running Bales (RBs), while shipments were positive by 30% W/W at 311,809 RBs.
Total shipment for the current marketing year (MY) 2017-18 (Aug-July) stood 94.3% at 15.27 million statistical bales (480lb) against USDA's target of 16.2 million statistical bales.
Outstanding for the current MY now totalled at 13.1% or 2.12 million statistical bales. Total commitment now reached at 107.4% or 17.39 million bales.
The revised target of 16.2 million statistical bales by USDA is unlikely to meet with current shipment pace as only 2 weeks left in the current MY.
Total sales against 2018-19 were also off as against the previous period of around 203,768 RBs, while sales against 2018-19 stood at 6.45 million RBs.
ON CALL SALES
On call sales as on July 20 revealed that unfixed on call sales increased by 2.75% to 15.34 million bales (480lb) against a week ago. Unfixed on call sales in December and March contract rose to 5.33 million bales and 3.82 million bales.
CFTC COT REPORT
Trade net shorts have reduced their positions a tad, but still hovered above 16 million bales, while managed money net long position increased to nearly 8.5 million bales. Speculators are net long and they have reduced their position 9.4% week-on-week at 1.7 million bales.
The hedge funds, which is said to smart money, have continued to increase their net long positions for the third straight week.
CHINA COTTON MARKET
Cotton January futures on ZCE exchange ended this week up by 0.5% to 16,820 yuan per tonne. China has sold around 1.73 million tonnes of cotton from state reserve as on July 27, which account 60% of total cotton put for auction. The average daily turnover this week stood at 14,984 tonnes, up from 14,858 tonnes a week ago. Demand for state reserve cotton improved week-on-week. Lowest price this week stood at 14,000 yuan per tonne, while highest at 16,480 yuan per tonne.
CONCLUSION
ICE December cotton is expected to continue to move in tight range of 84-89 cents per pound in the absence of any major positive or negative news flow. The market is equally balanced at present, favouring neither the bulls nor the bears and thus volatility in price can’t be ruled out.
(By Commoditiescontrol Bureau; +91-22-40015533)
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