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Weekly ICE Cotton: Ends Down On Weak Export Sales, WASDE Data

15 Jul 2019 7:57 am
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MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended down led by disappointing weekly export sales in addition to the USDA’s World Agricultural Supply and Demand Report for 2019-20 which revised up its beginning and ending stock projections.

The most active December cotton contract ended down 1.7% to 62.68 cents per lb. Volumes in the December contract as on Friday stood at 13,240 compared with 10,851 a week ago. The March 2020 contract also ended down 1.7% to 63.74 cents per lb.

During the first two days of the week, prices were on a downtrend due to the conducive weather conditions in Texas and as the crop condition showed improvements.

Monday, USDA released the crop condition report which showed that the cotton crop as on July 7 stood at 54% good/excellent, up 2% from last week and 13% higher on year. It is also 5% higher than the 10-year average. Texas and Georgia were the major growing states that showing improved conditions at 48% (up 4% on week) and 60% (up 2% on week) respectively.

Prices inched up briefly ahead of the weekly export sales and the WASDE report on Thursday amid expectations that the numbers would be healthy.

Production estimates were largely seen in the range of 21.5 million bales to 22.3 million bales compared with 22.0 million bales estimated in June. A Bloomberg survey had pegged US cotton output at 21.86 million bales, while US ending stocks are pegged slightly higher at 6.53 million bales compared with 6.40 million bales estimated in June.

However, the latest WASDE report merely revised its beginning and ending stock projections higher from the June report. Beginning stocks were revised higher by 350,000 bales on lower domestic consumption and exports in 2018-19. Domestic consumption was seen declining by 100,000 bales while exports were seen lower by 250,000 bales.

“With only 3.1 million bales of domestic use, exports will need to be strong to prevent a major accumulation of stocks…If shipments end up being weaker than forecast, further build-up in supply in the world’s largest exporter could weigh on prices globally,” said a report by Cotton Incorporated.

Ending stocks for the year were pegged higher by 300,000 bales to 6.7 million, or 33% of use.

“In 2019-20, world consumption is seen lower as reductions for Bangladesh and China more than offset mill-use gains for India, Turkmenistan, and Vietnam. World production is nearly 500,000 bales higher this month in both 2018-19 and 2019-20, largely due to increases in India’s crop,” the report said.

Meanwhile, the weekly export sales also reported dismal numbers adding to the fall in prices.

US export sales for the week to July 4 showed net sales for 2018-19 fell 62% on week. China reported reductions worth 10,000 RB. For 2019-20, net sales stood at 38,400 RB. Exports of 333,200 RB were down 2% on week and down 1% from the prior 4-week average. Net sales of Pima cotton totalled 700 RB compared with 2,500 RB a week ago. Exports of 10,800 RB were down 34% on week and 40% from the prior 4-week average.

Meanwhile, prices received some support ahead of the onset of hurricane Barry which hit the coast of Louisiana today but as per the latest reports have now weakened to a tropical storm.

Data released by the US Commodities Futures Trading Commission data for the week to July 9 showed managed money traders added net short by 4,063 contracts taking their total net short positions to 41,727contracts. Open interest for the week stood at 241,738, up 13,127 on week.

This week, prices are likely to remain soft as the hurricane Barry seemed to have weakened and is unlikely to cause major damage to the crops.

Rains in India seemed to have improved, which could also soften prices.

India received above-normal rainfalls in the week to July 10 for the first time since the season began on June 1. The improved rainfall helped cut the rainfall deficit in the country to 14% compared with 28% deficit a week ago.

Traders will also eye for major developments between the US and China on a possible trade deal.

Last week, US President Donald Trump tweeted that China was “letting the US down” by not buying enough agricultural products.

“China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would. Hopefully, they will start soon!” Trump tweeted.

The December contract is seen moving in the 62.37-63.22 cents range this week.

(Commoditiescontrol Bureau)

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