Mumbai, 22 JAN (Commoditiescontrol): Cotton futures continued the see-saw pattern this week, as they took back all of the previous week’s losses. Renewed China demand prospect has been the key driving the complex higher. Further, the U.S. macro data hints at a less aggressive rate hike from the Federal Reserve and the softer tone of the dollar helped strengthen cotton prices.
On Friday, ICE cotton futures surged near two month high, due to better-than-expected U.S. export sales data. A rally in crude oil prices came in handy for natural fibre. Higher oil prices make polyester, a cotton substitute, more expensive.
ICE Cotton contracts for March 2023 finished at 86.70 cents, up 3.31 cents, July settled at 87.22 cents, up 3.04 cents and December 2023 ended at 84.67 cents, 2.35 cents higher; estimated volume was 41,770 contracts.
For the week, March Cotton finished some 4.41 cents higher and 3.33 cents up for the month and year, respectively.
Dealers said China's reopening is going to happen faster than people would feel comfortable with. This could lead to decent export sales data next week, which will confirm the worst is over.
The U.S. Department of Agriculture's weekly export sales reported net sales of 209,400 running bales (RB) of cotton for 2022/2023, up from the last week and the prior 4-week average. That was a nearly 3x increase from the week prior but was still down 23% from the same week last year.
China was the dominant buyer with 55,000 bales. Shipments were much stronger as well. There is an underlying mood that once China clears peak COVID, its economy should quickly recover.
Meanwhile, combining both crop years, net sales were 235,000 bales, which is an amount not seen in many weeks. The accumulated export sits at 4.2m Running Bales as of Jan 12.
Cotton export shipments YTD have been 23% larger than last year, as unshipped sales commitments are 38% smaller. Total commitments are down 20% in total vs. last year and are 80% of USDA’s forecast total, 2% behind normal. Cotton Ginnings data from Friday indicated 13.707 million RB had been ginned by January 15.
As per the USDA’s weekly Cotton Market Review, about 29,000 bales of cotton were sold at the spot through the week at an average cash price of 81.93 cents. The season’s running total is 265,609 bales, well below last year’s 1.08 million.
The Cotlook A Index remained for Jan 18, was 50 points higher at 98.6 cents/lb. The AWP for cotton was 225 points lower to 72.43 cents while ICE Certified Stocks were 8,900 bales.
Meanwhile, the weekly Commitment of Traders report from the Commodity Futures Trading Commission (CFTC) showed cotton speculative traders flipped to net short during the week of Jan 17. The group’s net new selling flipped the group from 9,100 contracts net long to 1,900 contracts net short, their first net short position since May 2020. Commercial cotton hedgers lifted 6,300 short hedges for a 31,476 contract net short as of Jan 17.
Lack of demand was the overriding factor in the cotton market recently, and China preparing to reopen its borders can fuel enthusiasm. Talks of an accommodative monetary stance could pep up underlying sentiment.
Next week, the market will see new export data on Thursday, as well as the Q4 GDP Report. Also, China will be "closed" next week to celebrate Lunar New Year. It is expected that COVID infections will dramatically ramp higher due to the mixing and mingling of the travelling population.
For Monday, support for the December Cotton contract is at 84.58 cents and 82.47 cents, with resistance at 87.80 cents and 88.91 cents.
(By Commoditiescontrol Bureau: 09820130172)
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