MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended up during the week driven by extreme weather conditions, strong export sales and as traders covered their short positions.
The most active July cotton contract ended up 3.6% to 68.39 cents per lb. The December contract also ended up 3.6% at 67.55 cents per lb. Volumes in the July contract stood at 14,084 compared with 21,156 a week ago.
Prices started on a strong note as extreme weather conditions with tornadoes and storms lashed central USA, including parts of Texas and Oklahoma. The National Weather Service Storm Prediction Center (SPC) for the first time issued a high-risk warning for the region since May 2017.
Nearly 60 tornadoes were reported on Monday and Tuesday according to local news agencies. The rough weather also led to hail in the Plains on Thursday.
With the extreme weather conditions, there are fears that plantings may get disrupted.
In the week to May 19, USDA’s Crop Progress report showed that the 15 states had planted 44% of the crop compared with 50% a year ago. Georgia has completed 95% of its plantations, while Texas was at 39%.
A day before the weekly export sales, however, traders preferred to stay light on positions.
On Thursday, US export sales data for the week ended May 16, net sales of the old crop were at 381,400 RB, up 68% from the previous week and up 80% from the prior 4-week average. China cancelled orders worth 25,100 RB. For the new crop, net sales of 241,500 RB were recorded with exports falling 4% to 348,600 RB.
Net sales reductions of the high-grade Pima cotton totalled 2,100 RB, down noticeably from the previous week and from the prior 4-week average with increases primarily for India (400 RB), Taiwan (400 RB), Bangladesh (300 RB).
However, the on-going trade war between US and China kept a lid on a rise in prices.
The trade war between US and China deepened with US authorities blacklisting Chinese telecom giant Huawei while US giant Google restricted access to Android systems in retaliation.
The war of words between the two countries intensified, leading to fears of the possibility of a deal between the two countries.
Thursday, US President Donald Trump unveiled a $16 billion financial aid for farmers impacted by the trade war. However, details of the package are awaited.
Trump told news reporters during the week that, “Farmers have been attacked by China,” adding that China had “taken advantage” of the US economy for long.
China's Ministry of Commerce also warned, "if the U.S. wants to resume talks, they should show sincerity and correct their wrong practices."
By Friday, prices were back up as traders covered their short positions ahead of the long weekend as markets will remain shut on Monday for Memorial Day.
Data released by the US Commodities Futures Trading Commission data for the week to May 21 showed managed money traders reduced long position by 2760 contracts and added short position by 9498 contracts thereby increasing net short position by 12258 contracts to 37086 contracts. Whereas Trade continued to reduce net short position by 15781 contracts to 23490 contracts a record low in recent times. Open interest for the week stood at 280,110, up 2,938 on the week.
Cotton on call unfixed sales for the week to May 17 reduced by 7542 contracts to 12509 contracts.
This week, the weather will hold the key for cotton prices. According to Accuweather, more severe weather and flooding will threaten Texas, Kansas to Missouri into the Memorial Day holiday weekend.
On Tuesday, traders will look to the planting progress report for cues, while the export sales data on Friday could give further direction.
Aggressive short covering by trade has resulted in shifting July-Dec spread from carry to inverse again. We may see inverse to rise further as adverse weather and strong export sales will restrict sales in July contract and likely selling from trade to hedge new crop December contract higher level.
Until the expiry of July, contract market is likely to remain firm due to short covering and fixation of cotton on-call sales position coupled with the adverse weather condition and strong export sales. The July contract could trade in a broad range of 66.87-69.35 cents this week.
(Commoditiescontrol Bureau)
0 Comments 
Post Comment 
