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Weekly:ICE Cotton Up 5th Consecutive Week on Higher Sales, Trade Deal Optimism

5 Jan 2020 1:03 pm
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Mumbai (Commodities Control) - For the week, ICE cotton marked its fifth consecutive weekly gain, mainly due to continued short-covering by speculators as signs of a breakthrough in the U.S. China trade relations and bullish equity market improved the sentiment in commodities markets as well. The weak dollar index was also supportive of the market.

The most-active ICE March Cotton closed 28 points higher at 69.20 cents/lb for the week. Meanwhile, May Cotton closed up 30 points at 70.38 cents/lb for the week. March-May spread was 118 points.

The market was firm on Monday but closed in red on Tuesday on profit-booking on the last trading day of the year. However, cotton futures on Friday slipped from a seven-month high reached in the previous session, as risk sentiment soured after a U.S. strike killed top Iranian commander.

Through late Thursday afternoon, The Seam’s G2B platform traded more than 52,000 bales during the week. The average price received by producers was 59.86 cents per pound and the average premium over the CCC loan was 9.10 cents per pound. G2B offers stood at 256,000 bales.

The U.S. Department of Agriculture (USDA) in its weekly export sales report released earlier showed net sales of 246,200 running bales (RB) for the 2019/20 marketing year, up 82% from the previous week and was 7.88% higher than the same week last year.

In the first 22 weeks of the 2019-20 marketing year, 4.1 million bales have been exported. Sales and shipments are still on pace for USDA’s target of 16.5 million statistical bales, but shipments are just entering their busy season and need to be watched closely.

Data released by the U.S. Commodities Futures Trading Commission data for the week to December 24 showed managed money traders’ net-long position increased by 10593 lots to 18525 contracts this was due to short covering of 6802 contracts and a fresh long position of 3791 contracts.Whereas Trade continued to add their net short position which increased during the week 10175 contracts to 59577 contracts.

Iran promised retaliation after a U.S. airstrike in Baghdad on Friday killed Qassem Soleimani, Tehran's most prominent military commander, ratcheting up tensions in the Middle East. Apart from tension in the Middle-east, it may also derail US-China trade talks as China have close ties with Iran.

In the week ahead, apart from geopolitical tension market will keep an eye on the January WASDE and Crop Production report, which will be released next Friday, January 10, at 11:00 a.m. Aside from next week’s Export Sales Report, the WASDE will be the center of focus.

The Labor Department will release its jobs data on Friday. Last month’s jobs report far exceeded all analysts’ expectation and set a positive tone not only for the financial markets, but the cotton market as well.

Ice cotton futures are in overbought position any negative development in the middle east or US-China trade talk may lead to a correction. Support and resistance for the active-contract of Cotton #2 stands at 67.99 cents and 70.21 cents/lb., respectively.

(By Commoditiescontrol Bureau; +91-22-40015502)

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