Mumbai (Commodities Control) – ICE cotton active-contract settles 92 points lower for the week ended 29th January. March’21 futures settled 1.13% weaker for the latest week, after four straight weeks of upward rally. The Mar-May spread stood at 120 points vs 110 points last week.
During the week, March futures went as high as 82.5 cents and briefly dipped under 80 cents. However, the fibre managed to settle for the week above 80 cents per lb levels.
Last week, NY cotton managed to end 41 points higher. It is to be noted that for the week ended 22nd January, ICE March cotton contract peaked at 83.03 cents per lb.
The week witnessed a southward price trend. Cotlook index fell 1.7%, while the Chinese cotton futures fell 2.8% for January contact and 2.7% for March contract.
Meanwhile, the weekly Commitment of Traders report showed managed money reduced their net long by 192 contracts to 67,661 contracts as of 26th January. From Jan 19 to Jan 26 spec traders had added 1,078 shorts and 886 new longs. The Open interest rose by 10,403 contracts to 301,909. This marked the third straight weekly decline in the net long positions.
Having said so, ICE Cotton futures managed an eighth straight monthly gain on Friday as an initial dip to a near three-week low prompted mills to lap up the natural fiber.
The cotton contract for Mar 21 closed at 80.64 cents, up 71 points and May 21 Cotton closed at 81.84, up 71 points. Jul 21 Cotton closed at 82.78 cents, up 72 points and Dec 21 Cotton closed at 77.69, up 19 points.
It is to be noted that during the week, cotton futures managed to end in green only on Monday and Friday, primarily due to gains in the grain market.
On Friday, Cotton took cues from gains in Chicago corn futures, which rose to hold near 7-1/2 year highs on massive Chinese purchases, as well as soybean and wheat markets.
"Since this crop has produced a lot of discounted grades, U.S. offers are attractively priced and will likely continue to find ready buyers, especially after this week's drop in futures," British merchant Plexus Cotton said in a note.
Some support came via U.S weekly exports and shipments data, as the USDA showed that net sales of 322,700 running bales (RB) for 2020/2021 were up 10% from the previous week.
Next week ushers in a new trading month, and thus a new supply-demand number. USDA will release its latest update on Feb. 9th. Traders are anticipating an increase in domestic exports, and thus a decrease in domestic ending stocks.
Market experts note that it is the lack of spec buying over the last few weeks due to which the market has drifted back into its long-term trend channel. However they add that the bull market still has some steam left.
This simply means that the fibre may correct a bit before resuming its uptrend.
Support and resistance for Cotton #2 lies at 78.88 cents and 82.18 cents per lb, respectively.
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