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Weekly:ICE Cotton likely To Remain Volatile On July Contract Expiry

16 Jun 2019 9:56 pm
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MUMBAI (Commoditiescontrol) – ICE cotton December contract gained 24 points to close at 65.75 .whereas July contract gained 35 points to close at 65.94. Spread between July and December contract was at 19 points.

During the week market moved in a narrow range after recording a sharp fall last week.

Planting progress was though behind last year progress at the same time but was better than market expectation. Plantings Progress Data showed the 15 cotton-growing states had planted 75% of the crop as on Jun 10 compared with 88% a year ago. Texas recorded plantings at 67% compared with 85% a year ago. Georgia fared better with 90% plantings completed compared with 84% a year ago. Though wet weather has slowed down planting progress but is seen as a bearish factor as it increases the probability of the better crop in non-irrigated areas.

WASDE report published on Tuesday had no surprises and it was bearish as per market expectation. The U.S. balance sheet was unchanged in both the current marketing year and the next. The most significant changes to world figures were a decrease in China’s consumption for both crop years, an increase in India’s crop size for 2018-19, and cuts to Australia’s production. World production for 2019-20 was revised down by 130,000 bales, but consumption was cut 660,000 bales. With the beginning, stocks raised 1.06 million bales as well, global ending stock for 2019-20 was forecast at 77.26 million bales, up 1.57 million.

The U.S. Department of Agriculture (USDA) reported net sales of 75,100 running bales(RB) for the marketing year 2018/2019 were down 59% from the previous week while exports of 360,400 RB were up 17%.

Most of the reports released this week were bearish in nature but these were already discounted in price and were not surprising for the market hence there was not much impact on prices.

Data released by the US Commodities Futures Trading Commission data for the week to June 11 showed managed money traders added 942 contracts to long position and added a short position by 3378 contracts thereby adding net short position by 2436 contracts to 30241 contracts. On the other hand Producers/Merchant (Trade) added their long position by 1978 contracts and short position by 5465 contracts thereby adding 3487 contract to their short position taking it to 31076 contracts.

As of Thursday open interest of July contract was 40304 contracts or about four million bales and outstanding position in cotton on-call sales was 9084 contracts or 0.9 million bales. Against this certified stock is 89643bales.This means contracts of about five million bales are to be squared up before 24th June first delivery day for July contract. So we may see short covering in the market and see recovery in prices before 24th June.

For the week ahead, traders will be keenly watching The weekly Crop Progress Report. Shipment and sales data on the Export Sales and Federal Open Market Committee Meetings on 18-19 June for market direction.

Most of the news as of now are bearish for the cotton market in the long run but for short run, till July contract goes in delivery period on 24th June, we may see some up move from these levels due to short covering in futures and fixation of cotton on call sales.

Support for July contract is 64.5cents/lb and resistance is 69.8 cents.

(Commoditiescontrol Bureau)

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