Mumbai (Commodities Control) - The cotton market ended over 5% higher for the week on hope of easing lockdown restrictions in the United States coupled with the talks of Chinese Purchase of US products, including 1 million tons of cotton.
For the week ended 24th April, most active cotton contract ended 277 points higher, while the May futures posted weekly gains of 216 points.
However on Friday, the front month cotton futures closed in the red with losses of 48 to 65 points barring May futures which ended down by 195 points.
ICE cotton prices slid on Friday as investors liquidated their long positions with concerns lingering over the slump in demand caused by the coronavirus outbreak. The most active cotton contract on ICE futures closed at 55.63 cents, down 74 points. July cotton finished 478 points up on the month.
Speculative sellers continue to build short positions for the 7th week in a row. According to CFTC data for the week ended 21st April, Cotton speculative traders expanded their CFTC net short position by 2210 contracts. Managed money was 25,490 contracts net short on April 21; highest in 30 weeks.
This week exports-sales did report a positive number, although the trade was set for more cancellations. Congress passed another nearly $500 billion aid package for small businesses upended by the coronavirus. However, jobless claims increased another 5.2 million people, sent the total number of unemployed Americans above 25 million.
The week was similar in its roller coaster pattern whilst it swung between gains and lows until mid-week. Monday gave a surprising start with triple digit gains as ICE cotton futures to hit their highest in a week despite weak stock markets and crude oil; spot traded at negative value for the first time ever. May Cotton closed at 54.03, up 126 points, while July settled up 99 points at 53.85 cents.
Meanwhile Cotton planting progress advanced 2 percentage points to 11% complete by April 19. The average progress for week 16 for cotton planting stood at 9%.
Tuesday’s settlement took away nearly 70 points off, as risky assets dealt with a heavy blow from crumbling crude prices and as the coronavirus shuttered economies worldwide.
Wednesday was back on its feet with nearly 4% rise; rally came on the back of speculative short-covering on news out of China overnight, that relayed the nation’s National Reserve planned to ask permission to purchase large amounts of commodities including soybeans and cotton – nearly the equivalent of 4.6M bales for the latter.
Australian cotton harvest is typically late March through April, the country’s 2020/21 cotton crop had just 60,000 HA planted, compared to the 292,380 HA from last year.
ICE cotton futures managed a positive closing on Thursday as well. Cotton export sales were low but were at least net positive after two weeks of cancellations. Cotton bookings on the week ending April 16th were 15,660 RBs, with 4,563 RBs sold to China. Cotton shipments on the week were 266,243 RBs which put the MYTD shipments at 9.69m RBs, up 21% yr/yr.
The cotton contract has declined about 20% so far this year as the pandemic has paralyzed demand and led to lockdowns in many countries across the world.
Meanwhile in Indian markets, the nationwide lockdown has brought the textile and ginning mills to a virtual standstill amid liquidity crunch and labour shortage. According to CAI, the shutdown is likely to pull down cotton consumption by 30 lakh bales.
Cotton Association of India estimates cotton prices in the range of Rs 35,000-39,000/Candy, while Indian ginners see it falling to Rs 30,000/Candy in the near future as well.
Some analysts see a selling opportunity for the trade. While many experts feel that the low for the season is in.
Support and Resistance for cotton #2 lies at 54.41 cents and 57.31 cents per lb, respectively.
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