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Weekly: ICE cotton Ends down; Developments On US-China Trade Meet Eyed

23 Sep 2019 7:59 am
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MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended down last week as traders focussed on lack of demand from China as uncertainty looms over the US-China trade deal ahead of the scheduled October meeting.

The most active December cotton contract ended down 2.8% at 60.52 cents per lb. Volumes in the December contract dropped to 11,629 compared with 25,742 a week ago. The March 2020 contract ended down 2.6% to 61.17 cents per lb.

Prices started on a firm note last week as tensions thawed between the US and China ahead of deputy level talks.

The sharp 15% rise in global crude oil prices also lifted cotton prices as a Saudi Arabian oil facility lost half of its oil production in a drone attack and a fire at the key Abqaiq over the weekend.

Meanwhile, the US Department of Agriculture’s weekly crop progress report as on September 15 showed the “good” rating for the 15 cotton-growing states slipping to 34% from 37% a week ago. The “excellent” rating was at 7% from 6% the previous week, while the “fair” rating improved to 42% from 39% previous week. The harvest numbers showed that the 15 states had gathered 9% of the crop compared with 13% a year ago.

There was a mild mid-week correction in prices on views that cotton had been over-bought. The previous week, prices had risen over 6% amid renewed hopes of a US-China trade deal with both countries announcing goodwill measures.

However, last week uncertainty loomed over the deal after Chinese trade officials in Washington to discuss trade ties with US officials cancelled their scheduled trip with US farmers and wrapped up their meetings earlier-than-expected.

This sudden change of plans led to uncertainty over the scheduled trade talks between the US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin and China’s top negotiator, Vice Premier Liu He in October.

US President Donald Trump told reporters on Friday that he doesn’t need a trade deal with China ahead of the 2020 elections.

“I think people know that we’re doing a great job…China’s being affected very badly. We’re not, we’re not being affected,” Trump said, adding “we have, right now, a little spat (with China).”

Moreover, the weekly export sales data for the week ended September 12 showed that China continued to cancel export orders. Net sales for 2019-20 stood at 85,000 RB, up 14% on week, but down 38% from the prior 4-week average. While increases were reported for Mexico (43,300 RB), Pakistan (20,400 RB), Costa Rica (15,200 RB), Turkey (14,300 RB), and Vietnam (11,000 RB); reductions worth 39,300 RB were reported for China.

For the 2020-2021 crop, net sales improved to 19,300 RB compared with 500 RB a week ago. Net sales of the high-grade Pima cotton jumped to 15,900 RB, up compared with 3,800 RB the previous week.

China also continued to sell cotton from its state reserves. According to reports, 11,862 tonnes of cotton was sold from Chinese state reserves on Thursday, which is about 99% of the amount offered.

Data released by the US Commodities Futures Trading Commission data for the week to September 10 showed managed money traders reduced their net short positions by 9,674 thereby narrowing total net short positions to 24,980. Open interest for the week stood at 301,490, up 4,428 on week.

This week, cotton markets are likely to focus on the developments on the US-China trade deal front ahead of the important October meeting.

Despite the uncertainties, both the countries are said to have conducted fruitful deputy level talks.

China’s state-run Xinhua news agency was quoted as saying on Saturday that senior negotiators had “conducted constructive discussions” in Washington agreeing to
“continue to maintain communication.”

Meanwhile, a statement released by the United States trade representative in Washington said “these discussions were productive, and the United States looks forward to welcoming a delegation from China for principal-level meetings in October.”

The December contract is seen moving in the 60.19-60.86 cent range this week with traders exercising caution.

(Commoditiescontrol Bureau)

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