MUMBAI (Commoditiescontrol)– Cotton prices on the Intercontinental Exchange ended up last week on short covering by managed money due to stronger export sales and lower-than-expected Prospective Plantings Report that was released at the fag end of the week.
The most active May cotton contract was up 103 points for the week at 77.61 cents per lb while the December contract managed to finish with a gain of 14 points at 75.51 cents per lb.
Cotton prices started the week by touching a three-month high on the back of technical buying and short-covering as traders prepared themselves for data releases during the week.
On Wednesday market lost 94 points ahead of weekly sales report and USDA Planting Intentions Data.
Thursday's US Department of Agriculture’s export sales for the week ended Mar 21 showed net sales of 219,000 RB of cotton, a 75% rise over the previous week. The buyers were across the spectrum with Vietnam leading at 98,600 RB. Pima cotton sales stood at 31,300 RB, up 41% on the week. Purchases by China, which have been the focus in the past few weeks, also was a net buyer at 36,600 RB and 19,200 of Pima cotton.
But market ignored strong sales numbers and lost 108 points on the expectation that USDA will report a large increase in planting intentions.
Friday’s USDA Planting Intentions Data turned out to be a positive surprise for the market as it was significantly lower at 13.78 million acres compared to the market expectation of around 14.1 million-15.40 million. The lower intentions were mainly because of the heavy rains that have disrupted cotton timelines.
This resulted in a sharp rise in price and May contract closed with gains of 174 points on Friday.
As per Futures and options, combined data released by the US Commodities Futures Trading Commission for the week ending Mar 26 showed managed money traders were net long by 573 lots as compared to net short position 10818 lots. Open interest for the week stood at 226,594 up 2,328 lots.
This week apart for export sales numbers, the focus would be on US-China trade negotiations that will resume in the US.
Friday, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin concluded their talks with China’s Vice Premier and top negotiator Liu He with Mnuchin terming the negotiations in China as “constructive”.
A deal between the tariff-warring nations could ensure strong US cotton purchases by China, thereby keeping prices firm.
With drier climates forecasted for mid-west regions this week it has to be seen if farmers undertake initial planting, which has already been delayed.
The resistance for the May contract is seen at 78.37 cents and 79.12 levels in the short-term.
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