Mumbai, 25 Mar (Commoditiescontrol): Cotton complex has maintained its pull back during the week-ended Mar 22, extending its losing streak for the third week in a row, as demand concerns alongside stronger dollar undermined the improvement of US exports sales data. Further, the old crop outpacing new crop commitment suggests a few takers of the later at prevailing prices.
ICE cotton futures ended lower on Friday, falling to one-month low and posted its third straight weekly drop, pressured by a stronger dollar and lacklustre demand. The dollar was at an over three-month high, making cotton less attractive, especially for overseas buyers.
ICE Cotton contracts for May closed at 91.53 cents, 68 points lower. Jul settled at 91.85 cents, losing 41 points. Dec ended 3 point strong at 83.95 cents.
May settlement contract has lost 1.8% this week. The other active futures were 3 to 68 points in the red for the day, leading May to a weekly pullback of 241 points. Dec cotton was the outsider for the market, closing the last trade day a tad up. Dec finished the week 27 points above last Friday’s settle.
Traders are concerned by sluggish demand for US cotton, being less competitive as Brazilian or even Australian. Traders also took stock of weekly export sales.
The United State Department of Agriculture (USDA) Weekly Export Sales data from the week that ended Mar 14 showed 92,620 RBs of old crop cotton and 40,500 RBs of new crop was sold. That brought old crop commitments to 10.71m RBs, a 4% lag from last year’s pace, and new crop commitments to 99,500 RBs, still 27% behind last year's pace. That is 6% back of the 99% average pace for this point in the MY. Shipments were tallied at MT high of 397,297 RB. That took the MY total to 55% of the USDA forecast, 2% ahead of the average pace.
The destinations were mainly China at 183,700 RB and Vietnam at 61,300 RB. China is one of the top consumers of U.S. cotton.
The report also showed net sales of 92,600 RB for 2023/24, up 8% from the previous week and 20% from the prior 4-week average.
There's 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 pressurizing 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 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 3,612 bales were sold at spot for the week, averaging 87.14 cents/lb. The season’s total cash sales reached 796k bales vs 494,000 bales last year and 1.54m bales 2yr ago.
The Cotlook A Index for Mar 21 was 85 points lower to 97 cents flat. The AWP was revised 360 points lower to 72.50 cents per pound, in effect for farm program purposes through next Thursday. ICE certified stocks were shown at 41,756 bales as of Mar 20.
CFTC reported the cotton spec traders were dropping longs and adding new shorts during the week that ended Mar 19. That reduced their net long by 3,600 contracts to 89,522. Commercial cotton hedgers reduced their net short by 4,600 contracts to 127,900.
Cotton complex is largely driven by demand/supply factor, while little influence is pressed 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 is neutralised by China buying cotton from Brazil and Australia. The traders have resorted to reducing their net long position in cotton futures, which suggests cotton prices would stay softer for for some more time.
For Monday, support for the May Cotton contract is at 91.02 cents and 90.50 cents, with resistance at 92.45 cents and 93.36 cents.
(By Commoditiescontrol Bureau: 09820130172)
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