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Weekly: Cotton #2 Bounces Back on the Last Week of 2020; Best Annual Performance in Ten Years

3 Jan 2021 6:30 pm
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Mumbai (Commodities Control) – NY Cotton posted a weekly gain for the last week of 2020. Most-active March futures settled 198 points or 2.6% higher for the week ended 31st December. Also, ICE cotton futures tracked their best year since 2010 as strong demand for the natural fiber was further boosted by a weaker dollar. For the year, prices have gained more than 12.5%, their biggest yearly percentage gain since 2010.

NY Cotton shed 1.28% or 99 points for the holiday-shortened week ended 24th December. NY Cotton futures of March contract gathered 308 points for the week ended 18th December and 251 points higher for the prior week.

On Thursday, ICE Mar 21 Cotton closed at 78.12 cents, up 15 points and May 21 Cotton closed at 78.70 cents, up 13 points. July 21 Cotton closed at 79.17 cents, up 4 points. Dec 21 Cotton closed at 74.87, down 24 points. Mar’21-May’21 spread stands at 58 points vs 66 points last week.

From the beginning of the truncated week, cotton prices rose aided by a rally in equity markets, as President Donald Trump's signing of a long-awaited pandemic aid bill bolstered bets on an economic recovery and its likely fillip to demand for the natural fiber.

Contrary to the market expectation of yet another robust export sales data, the shipments weakened in the latest week. The U.S. Department of Agriculture's weekly export sales report showed net sales of 287,900 running bales for 2020/2021, down 30% from the previous week and 24% from the prior four-week average.Sales were down after 3 consecutive weeks of 400,000 RBs, but still more than 240% above the same week last season. Vietnam was the top purchaser on the week.

Cotton prices have gained more than 60% since dropping to multiyear lows in April on overall strong demand for the natural fiber after governments relaxed coronavirus lockdowns.

A broader weakness in the U.S. dollar and an extremely active 2020 Atlantic hurricane season in the United States raising concerns over a supply shortage offered further support to cotton.

The global market will be closed on Friday in observance of New Year’s Day. Trading will resume Sunday night at 9 p.m. ET.

This week’s CFTC data will now be released on 4th January on account of federal holiday on 1st January. For the week ended 21st December, CFTC data showed a rise in net longs to 70,553 contracts, up 537 contracts. New buyers extended the net longs by 11,221 contracts to 69,997 contracts for the week ended 15th December. The open interest was registered at 255,889 contracts vs 253,558 contracts last week.

It is to be noted that the market ended the year on a high note, with March closing at a new contract high. The year started with the spot month at 69.05 cents, then fell to a pandemic reaction low of 48.35 cents, before steadily climbing 30 cents since the beginning of April.

A weaker dollar, rising grain prices, strong Chinese prices, a bullish chart and a tightening US supply situation are all supporting a rising market. Plexus cotton continues to believe that the trade short-covering will likely move the market above 80 cents.

Immediate support and resistance for Cotton #2 lies at 77.09 and 78.91 cents per lb, respectively.

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