MUMBAI (Commoditiescontrol) - ICE cotton continued to witness seesaw movement over the last three weeks with trading in very tight range of 86.20 to 89.98 cents pound, finding it very difficult to break the technical resistance of 90 cents pound. The market sentiments remained shaky since July amid trade war, which has now escalated as U.S and China are gearing up for imposing tariffs on more goods and thus market sentiments as a whole are very much nervous despite some positive fundamentals.
China is preparing to retaliate in the escalating trade war with tariffs on about $60 billion worth of U.S. goods. The import taxes would range in rates from 5 percent to 25 percent, China's Ministry of Commerce said in a release on its website. There are four lists of goods, one for each of the rates proposed. Many of the goods are agricultural-related, with others on various metals and chemicals.
The most-active December cotton futures during the week ended (Jul 30-Aug 3) fell 0.24 cents, or 0.22 cents to 88.12 cents per pound. The contract traded within range of 86.76-89.98 cents per pound. Open interest in December contract during the week has improved and averaged at 17,645 lots versus 10,557 lots. Similar tone was observed in terms with trade volume as it averaged this week at 177,220 lots versus 173,614 lots.
Total volume and open interest on ICE cotton futures during the week averaged at 24,227 lots and 268,057 lots, much higher than the same period a year ago. The higher volume and OI are indicating that speculators and index funds this year have so far not in a mood to cut long positions significantly, infact its seem that they are adding long position on dips.
US WEEKLY EXPORT SALES
U.S. cotton weekly export sales for current marketing year 2017-18 (Aug-Jul) as on week ended July 26 stood higher 173% week-on-week at 22,241 Running Bales (RBs), whereas shipment was slow at 265,315 Rbs, down 15% from a week ago.
Cancellation were lower at 3,500 RBs.
Total shipment now reached at 15.54 million bales, which is 96% of USDA's target of 16.20 million bales, which is unlikely to meet as only one week left for the current marketing year to end. Outstanding numbers are at 1.87 million bales (11.5%).
Total commitment for the MY 2017-18 stood high at 107.5% or 17.41 million bales.
With four days of data to go, the final export number will likely be at around 15.85 million bales, or 0.35 million bales shy of the USDA number.
ON CALL SALES
The unfixed on call sales of all futures contract as on July 27 rose for the fourth straight week to 15.63 million bales, which is significantly higher from 11.19 million bales during the same period a year ago. Unfixed on call sales for December and January contract also advanced to 5.39 million bales and 3.87 million bales.
Over the last two years the trade has been quite patient with its on-call fixations and the market has rewarded traders for not panicking. But sooner or later mills might run out of luck and get caught in a runaway market, which they will then help to fuel with their fixations.
CFTC COT REPORT
Trade shorts net positions for the week ended July 31 increased week-on-week at 17.69 million bales. Meanwhile, hedge funds and speculators too have increased net long positions to 8.05 million bales and 2.09 million bales. Neither trades nor hedge funds/speculators are ready to blink first. Bearish at present have lesser reason to stay compared to bulls. Trades shorts may be adding positions with expectations that intensifying trade war between U.S and China will provide the gateway for them to exit, whereas bulls are expecting bullish movement ahead amid expectations of downward revision by USDA for production outlook in August release due to crop concern in many key producing regions followed by robust demand. The other reasons that are supportive for bulls are higher unfixed on call sales, forecast of lower stock outside China.
CONCLUSION
U.S cotton prices during the past three weeks were trading in the range of 84-90 cents per pound, in line with our weekly predictions. The prices are likely to trade range-bound with trade war between U.S and China will continue to shake the market either side but within tight range. Any decisive trend is likely only on technical breakout of either level 84 or 90 cents per pound. Market players will keep a close eye on USDA supply-demand report which is scheduled to release on Friday, August 10, 2018.
(By Commoditiescontrol Bureau; +91-22-40015533)