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Weekly: ICE Cotton Consolidates Past 70 Cents Touching 8-Month High;Eyes On ‘Phase 1’ Signing

12 Jan 2020 6:16 pm
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Mumbai (Commodities Control) – For the week, ICE cotton marked its sixth consecutive weekly gain, supported by optimism surrounding the U.S.-China trade deal, while a reduction in U.S. and world production and ending stocks estimates in the latest monthly supply and demand report added to the upbeat sentiment.

The most-active ICE March Cotton closed sharply up by 211 points at 71.31 cents/lb for the week. Meanwhile, May Cotton closed up 208 points at 72.46 cents/lb for the week. March-May spread was 115 points.

The market was firm throughout the week with the lingering hope of trade deal signing on January 15 in Washington D.C. ICE Cotton Futures ended 32-84 points higher at the beginning of the week, with March contract settling above 70 cents. Middle-east tensions from the prior week did shake up the market, a bit. However, towards the second half of the week, cotton futures raced up 73-79 points as cotton producers’ planting intention for year 2020 revealed a dip of 12% from 2019.

The USDA in its monthly World Agricultural Supply and Demand Estimates (WASDE) report lowered U.S. production estimates for the 2019/20 crop year to 20.1 million bales vs 20.2 million bales predicted last month, citing a decline in Texas.

While World ending stocks in 2019/20 are now forecast at 79.6 million bales, compared with last month's estimate of 80.3 million bales, while the outlook for U.S. ending stocks is now for 5.4 million bales compared with 5.5 million bales last month. World ending stock standing below the 80-million bale mark can be taken as a psychological positive by traders.

USDA’s Cotton Ginning’s Report showed that cotton ginned through Jan 1 were 17.484m RB that is 1.364 million RB more than 2017’s pace. The delayed Export Sales report from the USDA had cotton bookings for the week ending 2nd January at 157,473 RB. That was a 50.67% decrease vs. the same week last year.

Next week, all eyes will be on Washington, D.C., as the phase-one trade deal is expected to be signed by China and the U.S. Of course, much of the positive anticipation for this ceremony is thought to be already baked in the market.

This is evident from the fact that since its December low, cotton has rallied about 10%, and from its August harvest low, prices have risen about 25%.

China said it expects higher cotton imports for 2019/20 on prospects of a Sino-U.S. trade deal.
It is a definite positive that the world’s top two economies have come to trading terms to some degree.

The CFTC released their CoT report, with data from 7th January which showed that cotton speculative traders were very steady in their 20,879 contract net long, as it was only reduced week-on-week by 7 contracts. Whereas trade continued to add short position they added 8119 contract during the week to net short position of 73016 contracts. Open interest increased by 19006 contracts during the week to 280091 contracts.

Market experts believe there's nothing on the horizon that would derail the bullish momentum, and therefore feel that the path of least resistance remains higher. While some more scale-up hedge selling could be seen; won’t stop speculators in their tracks.Support and resistance for the active March contract lies at 69.98 cents and 72.06 cents, respectively.

( By Commodities Control Bureau +91-22-40015502)

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