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Weekly: NY Cotton Ends Past 70 Cents on Chinese Buying, Output Concerns in India; Bull trend to Continue

18 Oct 2020 8:41 pm
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Mumbai (Commodities Control) – For the week ended 16th October, the most-active ICE cotton futures jumped 3.13% higher. This was the future's second consecutive weekly gain. In the previous week, NY cotton ended nearly 2.7% higher for March’ 21. The comeback of Chinese market has been a positive factor for global cotton markets.

US, Brazilian and Indian cotton have all seen strong support from Chinese buying lately, which seems most likely to continue. Available port stocks have been eagerly taken up and Chinese merchants also bought about 150,000 bales of Indian cotton for arrival before the end of the year, which seems to be replacing Australian cotton, after it is no longer eligible to be imported under the favorable 1% TRQ.

Cotton prices in Indian markets surged higher, this week, especially in the Northern region, where Cotton Corp. has stepped up its procurement off late. Increased buying by private millers was witnessed and lower arrivals in Cotton majors like M.P and South Indian mandis have been keeping prices firm-to-steady.

Telangana, Andhra Pradesh and Karnataka received the heaviest October downpours in 100 years. Damage assessment is still under way, but these states account for about 28% of the planted acreage in India this season and there will be some quality and yield reduction.

Meanwhile, MCX October futures ended Rs 300 higher on Friday at Rs 19,390; up Rs 1,100 since October 6.

On Friday, ICE cotton futures jumped to their highest in more than eight months, as the dollar weakened and rains in major growing regions delayed harvest of the natural fiber. The cotton contract for December closed at 69.92 cents, up 70 points and March 21 Cotton closed at 70.56 cents, up 63 points. So the Dec’20-Mar’21 spread sits at 64 points vs 78 points last week.

A jump in September's U.S. retail sales, with receipts at clothing stores rising 11%, was also providing support, although sales remained well below their pre-pandemic levels.

The market largely ignored relatively poor weekly export sales data, with net sales down 45% from the previous week for the period ending October 1. USDA reported 98,870 RBs of upland cotton sold in the week ending 8th october. That was 48% below the same week last year. Exports of 192,621 RBs brought the MY total to 2.505m RBs through the first 10 weeks of the MY.

Meanwhile, CFTC released their weekly Commitment of Traders report. It showed a 6,862 contracts increase to the managed money’s net long at 59,942 Contracts, as of 13th October. Meanwhile the short-side position dipped to 3,368 contracts. The open interest stood at 281,835, up 11, 740 contracts.

Certificated cotton stocks deliverable as of Oct. 15 totaled 25,973 480-lb bales, up from 24,457 in the previous session.

With a supportive technical picture, a struggling U.S. dollar and strong agri commodities markets, it is most unlikely to see a case of bearish trend. This indicates continuation in the cotton bull market, unless there’s a case of speculative long liquidation.

Immediate support and resistance for Cotton #2 for March’21 lies at 69.95 cents and 70.93 cents per lb, respectively.

(Commodities Control Bureau)

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