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Weekly: ICE cotton Trade-in narrow range on US-China Trade talk Uncertainty

17 Nov 2019 10:38 pm
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MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange closed the week with marginal gains. Most active December contract traded in a range of 138 points before settling 12 points up for the week.

The ICE most active March contract closed up 12 points at 66.69 cents/lb for the week while the December 20 contract closed at 64.86 cents/lb with a gain of 14 points. The December-March spread strengthened to 183 points from previous weeks 185 points.

Cotton prices traded in a narrow range during the week amid bullish WASDE data released last week and robust exports sales number but uncertainty of US-China trade deal and contradicting news emerging throughout the week about the deal capped the gains at higher levels. Deteriorating condition in Hongkong and weak economic numbers across the global markets limited the gains.

On Tuesday USDA detailed the weekly harvest data for the week ended Novemeber10. Data showed harvesting had improved to 62% compared with 53% a week ago and five year average of 59 %.

The USDA in its weekly export sales report showed net sales of 345,100 running bales (RB) for 2019/20, a marketing-year high, and were up noticeably from the previous week and from the prior four-week average, for the period ended Nov. 7. The report showed a modest increase in exports to China from the previous week 25000 bales to 83000, which was very encouraging. The US is 63% committed and 17% shipped Vs the USDA projection of 16.5 million bales for 2019/20. Sales were well ahead of the average weekly pace required to meet the USDA’s yearly export projection while shipments were only around 37% of the pace requirement.

Data released by the US Commodities Futures Trading Commission data for the week to November 12 showed managed money traders and Trade reduced their net short position. Managed money reduced their net short position by 975 contracts to 14,272 contracts.Trade also reduced their net short position by 3436 contracts to 24,459 contracts. Open interest for the week was sharply down by 52288 contracts at 2,64,847 contract this may be due to call fixation by mills and producers as December contract goes into delivery on 22 nd November.

In other news, China has announced that its reserve will purchase 5 lakh metric tonnes(29.4 lakh Indian bales) of cotton from Xinjiang province from the 2nd of December through 31st March.

In spite of robust export sales numbers and bullish WASDE report market failed to record major gains because of the excessive supply of cotton across the globe. Even after revising down US crop to 20.8 million bales closing stock will be at 6.1 million bales which is considered as burdensome as it is a10 year high. In addition to this India is also expected to produce record crop but the supply of India origin is limited as it is premium to US origin. But once supply pressure picks up in India this premium is likely to vanish and may give competition to US cotton.

Price has discounted the bullish WASDE report and export numbers but the market to sustain these levels needs fresh the stimulus which is not visible at this point of time. In this scenario, any adverse news pertaining to US-China deal, unrest in Hongkong or on the economic front is likely to put pressure on prices.

Support for March contract is at 63 cents/lb and resistance is at 69 cents/lb.

(Commoditiescontrol Bureau)

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