WEEKLY: ICE Cotton Likely To Remain Under Pressure Next week

MUMBAI (Commodities control) - Throughout the week ICE cotton futures traded in a 170-point range between low of 73.15 cents/lb made on Jan 28 and a high of 74.85 made on Jan 31 and finally closed down 49 points for the week.

Total open interest gained by 4268 to 234,985 contracts. March-May spread strengthened to 129 points. However, USDA spot quotation was up by 64 points to 69.81 cents/lb for the week ending 31st January 2019.

Temporary end of US government shutdown supported sentiments as it has now become clear that the USDA will release its next demand supply report. Besides, weak dollar index as FOMC left its benchmark rate unchanged and said it would take a “patient” approach toward further hikes also underpinned sentiments.

Moreover, export sales for the week ending December 20 remained also buoyant. USDA export data showed net sales increased significantly for the week to 373,100 running bales (RB). It also showed exports at 14,700 RB, up 44 percent from the previous week.

Another positive factor for the market was higher crude oil prices on the back of Venezuela crisis.

While, slowing down of the global economy, particularly Chinese economy remained a major concerns and as against this backdrop market is expecting a revision of cotton consumption in coming WASDE report on Feb 8. Other factor which remained negative for market was the news that the US Justice Department was going to prosecute the CFO of Huawei. The new that China has dragged the US to the WTO over tariff dispute also weighed on sentiments.

Adding to woes, US -China trade talk has been postponed to February end. While, the market was expecting that the trade dispute will be settled in this meeting.

The market was trading up till Thursday but fell sharply on Friday on the news that US-China trade talks were postponed to Feb end. The market fell by 76 points and total open interest gained by 3476 points indicating fresh shorts being created in the market.

In the coming week, we may see prices under pressure due to rollover from March to May contract. At the same time market is expecting good export numbers and a downward revision in global crop estimate by USDA which will keep prices buoyant. The market is likely to trade in a range of 70-75 cents/lb for the week.

(By Commoditiescontrol Bureau)