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Weekly ICE Cotton: Up; Seen Rising Further As US-China Restart Trade Talks

1 Jul 2019 7:29 am
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MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended firm in the run-up the planted acres data and the Group of 20 countries meeting where US and China had extended talks on the tariff war.

The most active December cotton contract ended firm 3.2% to 66.08 cents per lb. Volumes in the December contract rose to 12,769 compared with 7,779 a week ago.

During the week, volumes fell to a one-month low of 9,969 as traders stayed away from taking major positions ahead of crucial data and the G20 meeting.

The planting progress data released on Monday was viewed as “mixed” with Georgia showing progress in its plantings, while progress in Texas was seen as lagging. The 15 cotton-growing states in the US had nearly completed plantings at 96% as on June 23, compared with 99% a year ago. Texas had completed 95%, same as last year. Georgia’s plantings stood at 98% compared with 96% a year ago.

The weekly export sales data also showed an improvement from the previous week. The US Department of Agriculture detailed the weekly export sales on Thursday which turned out to be an improvement from last week’s net sales reductions of 119,300 RB.

For the week ended June 27, net sales of 72,000 RB were reported for 2018-19 compared with net reductions of 119,300 RB a week ago. China and Japan cancelled orders worth 2,700 RB and 2,600 RB respectively. For 2019-2020, net sales of 45,300 RB

Exports of 322,600 RB were unchanged from the previous week, but down 8% from the prior 4-week average, USDA said. Net sales of the Pima cotton stood at 5,200 RB compared with 4,000 RB last week.

Traders overlooked the net sales data and instead focussed on the planted acres data Friday for 2019-20. 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. USDA’s March estimate was 13.8 million acres. Meanwhile, a Reuters survey had pegged acreage at 13.819 million acres.

Data released on Friday showed all-US cotton planted area was pegged at 13.70 million acres, slightly lower than 13.78 pegged in March and 3% lower on year. Prices remained subdued Friday in anticipation of the US-China meeting over the weekend.

Data released by the US Commodities Futures Trading Commission data for the week to June 25 showed managed money traders were net short by 763 positions taking their total net short positions to 37,460. Open interest for the week stood at 222,612, down 705 on week.

On Saturday, US President Donald Trump told the media that the US and China would restart the trade negotiations after a brief war of words earlier this month and imposition of tariffs on each other.

The US will also allow its companies to sell to the Chinese tech giant Huawei. On the sidelines of the summit, Trump confirmed that the US would not be imposing additional tariffs on $300bn worth of Chinese goods.

This development is likely to bring cheer to the cotton markets as traders will now anticipate a trade deal between the countries will increase demand.

The December contract could break 67 cent levels this week on the news but upside should be limited as we may see selling from trade to hedge their new crop positions.

(Commoditiescontrol Bureau)

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