Mumbai, 15 JAN (Commoditiescontrol): ICE cotton futures inched up on Friday, but posted their worst week in nearly two months after the U.S. Department of Agriculture (USDA) increased forecast for U.S. output and ending stocks in its monthly supply-demand report.
ICE Cotton contracts for March 2023 finished at 82.29 cents, plus 25; July settled at 82.87 cents, up 52, and December 23 ended at 80.79, 71 higher. Friday's estimated volume was 38,992 contracts.
Spot March finished down 339 points on the week, off 108 for the month and year.
The contract was down about 3.4% so far this week. The market will be closed on Monday for the U.S. holiday – Martin Luther King Jr Day.
Earlier in the week, the export sales report was positive. USDA's weekly export sales report showed net sales of 72,600 running bales (RB) of cotton for 2022/2023, up 83% from the previous week and up noticeably from the prior 4-week average.
After the positive US export sales report earlier this week, traders were waiting to see what the demand-supply report from the USDA was going to show. The much awaited report release has done the trick.
The USDA's World Agricultural Supply and Demand Estimates (WASDE) report on Thursday showed higher projection for U.S. production at 14.68 million bales and ending stocks at 4.20 million bales for the 2022/23 crop year.
The report also suggested that the cumulative sales for 2022/23 have reached 8.859 million bales, down from 10.994 million a year ago, and the lowest level since the 16/17 season.
Sales have reached 73% of the USDA forecast for the marketing year versus a five-year average 79%. The largest buyer this week was Turkey at 19,646 bales, followed by China at 16,438 and Vietnam at 11,795.
The next export-sales report will be on Friday, Jan. 20, at 8:30 a.m. EST.
Some support for cotton prices emerged during the week from strong oil prices and the US dollar. Crude oil prices rose by a dollar a barrel on Friday, which helped the commodity to post their biggest weekly gains since October. The U.S. dollar dropped to a nine-month low. Higher oil prices make polyester, a cotton substitute, more expensive.
Meanwhile, funds have been trimming their position over a period, which coincides with the WASDE report of strong production prospect. It is in conformity with the weak price outlook.
CFTC’s weekly Commitment of Traders report showed managed money was 9,110 contracts net long in cotton as of Jan 10. That was a 2,295 contract weaker net long through the week following long liquidation. Commercial cotton hedgers put on new positions through the week, with a total of 9,600 new contracts open. On net, their net short was 1,352 contracts lighter to 37,727 as of Jan 10.
USDA’s weekly Cotton Market Review showed 32,800 bales were transacted during the week, averaging 83.27 cents/lb. The Cotlook A Index from Jan 12 was 70 points lower to 100.10 cents. The FSA raised the AWP for cotton by 170 points to 74.68 cents.
For Monday, support for December Cotton contract is at 81.49 cents and 80.70 cents, with resistance at 83.24 cents and 84.20 cents.
Cotton prices are likely to continue with the see saw pattern for some time as the overhang from Thursday's WASDE output projection will try to negate any support from oil strength and dollar weakness. Also, the price impact from increased abandonment of cotton farm in the US are neutralised by higher yield on the remaining acres. Expect volatility in prices for next few session till the export sales report on Jan 20.
(By Commoditiescontrol Bureau: 09820130172)
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