MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended mixed as expectations of strong demand from countries such as China offset the bearish US Department of Agriculture’s World Agricultural Supply and Demand Estimates for 2019.
The most active May cotton contract ended down 0.14 cents to 78.11 cents per lb . The July contract ended 0.3 cents down at 78.56 cents per lb. However, the December contract gained 0.30 cents on week to 77.19 cents, touching a new 2019 high of 77.75 on Friday.
Expectations were high at the beginning of the week in anticipation of a strong WASDE report that pushed prices to a near four-month high on Monday.
However, prices crashed on Tuesday as the WASDE report indicated at a fall in US consumption to 3.1 million bales, the lowest since the 1890s. The April report also pegged ending stocks for 2018-19 at 4.4 million bales, a 100,000 million bale increase from its 2018-19 estimate. China’s production by upped by around 250,000 bales.
The progress in the US-China trade talks provided some balm to the bearish markets. Wednesday, Treasury Secretary Steven Mnuchin told a news channel that both the countries have agreed on an enforcement mechanism to iron out differences faced during the negotiations.
The progress in the negotiations has increased hopes of improved demand from China for US cotton if the deal gets sealed. On Thursday, the National Development and Reform Committee, China’s planning department, announced that it has approved cotton sliding tariff import quota of 800,000 tonnes or 3.6 million bales for 2019. The announcement pushed up prices on Friday.
Prices were, however, unaffected by the strong weekly export sales data released on Thursday as it was offset by a stronger dollar.
For the week to April 4, net cotton sales were at 289,000 RB for 2018-19, down 10% on week, but up 61% on year. Net sales were also up 39% from the prior 4-week average. China emerged among the top three buyers at 43,600 RB. For 2019-2020, net sales of 205,900 RB were driven by Vietnam at 131,200 RB and China at 36,500 RB, among others. Net sales of the high-grade Pima cotton jumped 87% on week to 30,200 RB and up 22% from the prior 4-week average led by China’s purchases at 20,600 RB.
The dollar index rose 0.3% on Thursday, making imports of commodities, including cotton more expensive for other countries which could hit demand.
Data released by the US Commodities Futures Trading Commission data for the week to April 9 showed managed money traders trimmed short positions by 5,634 lots and added long position of 311 lots thereby reducing their net short position 5945 lots and taking their net long positions at 14,625.Whereas trade added short position by 8028 lots while they reduced their long position by 9911lots thereby increasing their net short position by 17939 lots. Open interest for the week stood at 277,215, down 7,225 on week.
This week, prices are likely to open with a positive bias on indications that the tariff war between China and the US may be nearing an end.
On Saturday, US Treasury Secretary Steven Mnuchin said that trade talks were nearing conclusion.
"It is more important to get it right than have arbitrary date," Mnuchin told reporters. But "I'm hopeful we're getting close to the final round of concluding issues," Mnuchin said adding that both countries are working hard to ensure a strong enforcement mechanism.
Monday, traders will also eye the USDA’s weekly planting progress report. As on April 7, the 15 cotton-growing states in the US had planted 6% of the crop compared with 7% a year ago. If the acreage shows strong progression, a sharp rise in prices could be limited with some resistance around 79.57-79.77 cents.
(By Commoditiescontrol Bureau)
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