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Weekly: Near-Term Price Outlook Looks Bearish For US Cotton

10 Feb 2019 4:39 pm
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MUMBAI (Commoditiescontrol) - ICE most active cotton March 19 contract traded in a 166-point range between high made on Feb 6 and low on Feb 8.

It was down by 109 points for the week to close at 72.55 cents/lb. Open interest fell from 102378 to 85844 till Thursday.

Reduction in open interest was mainly due to rollover from March to May contract.

Throughout the week market was trading in narrow range of 166 points with upper level fresh short selling was seen from the speculators while at lower levels bargain buying by the mills.

Factors which influenced trading activity for the week were US-China trade talk, Export sales data and WASDE report.

Since beginning of the week market was optimistic about US-china trade talk but this optimism faded away on Thursday when senior White House economic adviser, Larry Kudlow, said that the US and China “remain way apart on a trade deal.”

In addition the news came that the President Trump and President Xi would probably not meet before the March 1 trade deadline. This pulled down market by 94 points.

And finally WASDE report was very uneventful for cotton as it was as per market expectation which had not much impact as this number were already discounted in price.

The US and China will hold trade talks in Beijing next week, with deputy-level meetings to start on Monday and high-level talks to follow.

As per survey relrased planted area is expected to rise to 14.5 million up 2.9 percent from 2018. Assuming approximately 10% abandonment Cotton Belt harvested area totals 13.0 million acres. Using an average US yield per harvested acre of 840 pounds generates a cotton crop of 22.7 million bales, with 21.9 million upland bales and 782,000 ELS bales.

If this production is realised then it will be about 23% more than estimated crop of current year 18.39 million bales.Which is bearish for the market.

As per cotton report for the week ended Feb 8, total open interest was 281393 up from previous week 268835 lots. Trade were seen covering their short position while managed money was seen aggressively shorting the market indicating that market may remain weak in near future.

Uncertainties about US-China talk, increase in US planting intentions and larger US crop next season and managed money adding short position and gloomy picture of world economy particularly Europe are likely to keep market bearish in the near-term.

(By Commoditiescontrol Bureau)

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