Mumbai (Commoditiescontrol)- ICE cotton futures moved steadily higher for the second consecutive week on the back of strong export demand combined with uncertain weather in the US cotton belt. Bullish technicals also provided support to the market.
ICE July cotton contract rose 120 points or 1.4 percent and finished at 87 cents per lb whereas most active December contract closed with gains of 204 points or 2.37 percent at 87.92 cents per lb. July/Dec spread increased to 92 points a gain of 84 points week on week on the expectation tightening US cotton balance sheet for net crop year.
ICE cotton continued to move up sharply on the back of tight supply and strong demand. The market is expecting to mill use to increase due to the opening of the global economy. Further adverse weather conditions in the US and a bullish outlook in technical charts were supportive for the market. Managed money turned net buyers again after liquidating their long position for the last few weeks.
The weekly data release from CFTC showed managed money was 37,945 contracts net long on 8th June; up 2,933 contracts from the previous week. Trade increased their short position by 4,868 contracts to 1,31,241 contract . The open interest for the week was registered at 290,060 contracts vs 292,507 contracts last week down by 2448 contracts.
According to the Cotton-on-Call based New York, dated 10th June, the total unfixed call sales were reported at 113,434 vs 108,905 contracts on a weekly basis and total unfixed call purchases were reported at 48,962 vs 47,784 contracts. For July 2021, unfixed call sales were registered at 13,552 vs 15,933 contracts last week and unfixed call purchases were reported at 3,879 vs 4,157 contracts.
Export sales were slightly lower than in recent weeks but reflected a normal seasonal slowdown as summer arrives. Shippers made net new sales of 108,200 bales of Upland cotton for 2020-2021 and 21,400 for 2021-2022. Combined shipments of Upland and Pima continued to show strength at 275,100 bales, which gave the USDA plenty of room to increase its export estimate on this month’s WASDE report.
This month’s WASDE report confirmed tightness in US supplies it showed an increase in Us export for the current year and next year by 1.5 lakh and 1 lakh bales respectively and ending stock was also revised lower to 31.5 lakh bales and 29 lakh bales. Higher U.S. exports were supported by lower foreign production and the highest consumption forecast in a few years.
Meanwhile, Crop Progress and Condition report showed that Texas is 12 percentage points behind the average planting pace as growers in much of West Texas were delayed by rain-soaked fields. Squaring is also a bit behind pace as much of the early crop in South Texas and Louisiana were under fairly constant rain and cloud cover. Mid-South has unfortunately become a major watchpoint. Heavy rains have caused flooding in the Mississippi Delta, impacting crops, property, and livelihoods.
Next week’s market is likely to remain bullish as expiry of the July contract is approaching nearer and a tight US balance sheet may result in short-covering in futures and cotton on call.
Immediate support and resistance for Cotton #2 lies at 87 and 90 cents per lb, respectively.
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