MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended down during the week led by weak export sales data and the July options expiry, erasing gains made in the run-up to the Group of 20 countries meeting.
The most active December cotton contract ended down 7.2% to 65.56 cents per lb. The July contract also ended down 7.2% at 61.19 cents per lb. The July contract fell to a low of 60.27 cents this week, levels last seen in April 2016. Volumes in the December contract plunged sharply to 7,779 compared with 22,419 a week ago.
Prices were firm for the first three days of the week as the cotton market initially took cues from the grain market which was on an uptrend.
The US Department of Agriculture’s planting progress data up to June 16 released on Monday was also satisfactory. The data showed that the 15 states had planted 89% of the crop compared with 95% a year ago. Despite the uncertain weather conditions, Texas had finished planting 86% of cotton and Georgia had finished 96% plantings compared with 92% a year ago.
On Tuesday, prices surged as US President Donald Trump tweeted that there could be “extended talks” between him and his Chinese counterpart Xi Jinping at the G20 meeting this week. The tweet raised hopes that the severed trade ties between the two countries could be on the mend and thus leading to a trade deal and higher demand of US commodities.
However, prices erased gains and slid after the disappointing weekly export sales data for the week ended June 13 released on Thursday. Data showed net sales reductions of the old crop at 119,300 RB—the lowest during the year, compared with sales of 75,100 a week ago. Increases were reported for India (15,600 RB), Mexico (5,300 RB), and Egypt (5,100 RB), while reductions were seen for Turkey (84,600 RB) and China (69,900 RB). For the 2019-2020 crop, net sales of 221,800 RB were primarily for Turkey (98,200 RB), China (49,400 RB), El Salvador (22,500 RB), and Guatemala (15,800 RB).
Exports were down 11% on week at 321,200 with destinations primarily to India (59,200 RB), Turkey (55,700 RB), Vietnam (55,400 RB), China (36,000 RB), and Bangladesh (22,900 RB). Net sales of the high-grade Pima stood at 4,000 RB.
Meanwhile, China has been selling over 9,000 tonnes of cotton almost every day from its state reserves this week to make up for lack of US cotton as the stalemate between the two countries continues.
Prices were also volatile ahead of the expiry of the July contract on Monday.
Data released by the US Commodities Futures Trading Commission data for the week to May 21 showed managed money traders were net short by 144 positions taking their total net short positions to 30,385. Open interest for the week stood at 223,317, down 52,648 on the week.
Traders will now watch out for the planted acres report that will be released on Friday. A Bloomberg survey has projected 2019-20 US cotton plantings at 13.74 million acres as compared to 14.10 million acres estimated by the USDA for 2018-19.
The G20 meeting and the outcome of the Trump-Xi meeting will also be of importance for further cues on cotton.
As per market sources there may be more cancellation in US export sales in coming weeks and shipments are also not keeping pace with required monthly target required to achieve USDA target sales which mean US ending stock will be revised again upwards. Further US planting pace is satisfactory indicating US crop around 22 million bales about 20% more than last year. These factors are likely to keep price depressed going forward.
But technically the market is oversold and hopes of US-Chian trade talks and Us planting report may lead to short covering which may help the market recover in the short term from the current level before resuming downtrend again. The immediate support and resistance for the December contract are seen at 65.06 cents and 66.51 cents respectively.
(Commoditiescontrol Bureau)
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