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Weekly ICE Cotton: Slight Up As Renewed US-China Trade Talks Support

8 Jul 2019 7:28 am
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MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended slightly firm despite lower-than-expected weekly export sales as traders kept their hopes high from the renewed trade negotiations between US and China.

The most active December cotton contract ended up 0.5% to 66.82 cents per lb. Volumes in the December contract as on Friday stood at 10,851 compared with 12,769 a week ago.

Before the US Independence Day holiday on Thursday, markets seemed to be on a bullish mode following positive comments from US President Donald Trump about the US-China trade deal.

While Trump expressed his willingness to sign a deal, Trump also hinted that China will buy agricultural produce from the US.

On Sunday, US President Donald Trump told reporters, “China is going to be buying a tremendous amount of food and agricultural product, and they're going to start that very soon, almost immediately. We're going to give them lists of things that we'd like them to buy. Our farmers are going to be a tremendous beneficiary.”

However, there was a lack of clarity over which commodities specifically bought by China.

Friday, White House economic adviser Larry Kudlow told Bloomberg that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin has been talking to China’s top trade negotiator, Liu He on the phone and more such talks are in the pipeline.

Monday, the US Department of Agriculture also reported on the crop condition for 2019. According to media reports, the overall crop is rated 52% good or excellent, up 2% from last week. The very poor/poor rating was up 1% at 18%. The ten-year pace for the good/excellent category for this time of the year is 55%.

Meanwhile, prices fell by the end of the week amid thin holiday volumes and as export sales for the week ended June 27 were lower than market expectations. Net sales of upland cotton for 2018-19 stood at 141,500 RB, up 96% from the previous week. Exports of 340,400 RB were up 6% from the previous week. Net sales of Pima totalled 2,500 RB compared with 5,200 RB a week ago.

Although the net weekly sales improved from the previous week, it did not meet market expectations. The weekly figures are below the average needed to reach the USDA’s 2018-19 export forecast of 14.75 million bales.

The weekly Cotton On-Call report from CFTC showed mills at a total of 32,814 contracts of unfixed call sales for December, with unfixed call purchases at 39,149 contracts.COT data on future and option is delayed due to Federal holiday and will be released on 8th July.

Monday, traders will eye the planting progress data for further cues, while the on-going developments between China and US’ negotiators and July WASDE report to be published on 11th July will also be eyed.

Slow crop progress in US, expectations of short covering by managed money from lower levels and hopes of positive resolution for US-China trade will support the market but market gains could be limited as at higher level trade is likely to make fresh sells to hedge their new crop positions. These factors are likely to keep the market sideways and may trade in a band of 65.8 cents/lb and is 68.40 cents/lb. We may see a directional move if the market manages to break any of these levels.

(Commoditiescontrol Bureau)

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