Mumbai, 18 Mar (Commoditiescontrol): The choppy sessions experienced by Cotton complex during the week ended Mar 15th, forced prices to record their second straight week of decline. Traders have utilised the increased volatility to take same profit off the table through intermittent selling. The worries over global demand, particularly China demand, was at the core of swift price movement. However, the U.S. exports sales data provided opposite trend.
On Friday, ICE cotton futures ended firm, coming off three week low hit in previous session, as traders looked to short position led by bullish export sales data. A stronger dollar kept the price gains in check. The dollar index rose 0.1%, set to mark its best week since mid-January.
ICE Cotton contracts for May closed at 93.94 cents, 46 points higher. Jul settled at 93.59 cents, adding 33 points. Dec ended 25 point strong at 83.68 cents.
Nearby cotton futures settled the last trade day of the week 24 to 46 points in the black. May futures again tried to rally this week earlier, but closed off the highs for the week and at a net 134 point loss or 1.40%. Dec cotton finished the week with a net 69 point gain or 0.92%.
The United State Department of Agriculture (USDA) Weekly Export Sales data had 85,845 RBs of cotton booked for the week that ended Mar 7. That was up 65% for the week, but marked the 3rd consecutive sub-100,000 RBs week. Shipments were listed at 292,282 RBs for a running total of 5.97 million. Shipments at the same time last year were 5.95 million RBs. Commitments remain 2.3% behind last year’s pace compared to the WASDE forecast 3.7% year on year export decline.
Last Friday, USDA came out with the market friendly info. The federal agency surprisingly cut the cotton yield by another 23 lbs per acre to 822. That lowered production and tightened stocks with no other change to use. Cotton stocks are now projected at the tightest since 12/13 at 2.5 million lbs. Stocks/Use is still just a 2-year low.
On Thursday, FAS reported 52,000 RBs of cotton was sold for export during the week that ended Feb 29. That was up from the MY low last week but still 100,000 RBs shy of the 4-wk average. The week’s exports were listed at 331,000 RBs.
There is expectation for better demand, especially from India and China and the demand will impact the ending stocks even more, dealers said. Yet, stifled demand due to high cotton prices above 90 cents, makes it difficult for mills to buy, which is pressurising the market. A slight decrease in supply and demand is expected in the near term, with prices likely to remain volatile but will hold between 90-96 cents.
The USDA World Agricultural Supply and Demand Estimates (WASDE) report on Friday noted that 2023/24 U.S. cotton forecasts show lower production and ending stocks relative to last month. The report also showed global cotton consumption is almost 500,000 bales higher with gains for China and India. The U.S. Department of Agriculture (USDA) will release the planting intentions report on March 28.
Meanwhile, a U.S. weather forecaster on Thursday projected El Nino conditions will likely end by spring this year but saw a 62% chance that a weather pattern characterized by unusually cold temperatures in the Pacific Ocean, La Nina, will develop during June-August.
Elsewhere, the Australian agriculture ministry raised its estimate for the country's 2023/24 cotton production. It estimated cotton production at 1 million tons versus previous forecast of 925,000 tons.
USDA’s weekly Cotton Market Review showed 11,320 bales were sold at an average price of 89.25 cents/lb. The Cotlook A Index for Mar 14 was 40 points weaker to 99.80 cents/lb. The updated AWP is 76.10 cents/lb, down by 68 points from last week. ICE certified stocks added another 1,100 bales to 27,765 as of Mar 13.
This week’s Commitment of Traders report revealed managed money spec funds trimming 3,201 contracts from their net long in cotton futures and options. They took that net position to 93,160 contracts as of Tuesday March 12.
Cotton complex continue to focus on fundamental factors, particularly demand, after being influenced by key technical indicators such as traders covering shorts after price dropping to near one-month low. The skepticism about the U.S. cotton prices gaining traction this year has neutralised by China buying cotton from Brazil and Australia. Yet, the traders are piling on their net long position in cotton futures, which indicates continuation of firm price trend for some more time.
For Monday, support for the May Cotton contract is at 93.28 cents and 92.63 cents, with resistance at 94.57 cents and 95.21 cents.
(By Commoditiescontrol Bureau: 09820130172)
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