Mumbai, 16 Sep (Commoditiescontrol): The cotton market staged a comeback during the week ended Sep 14, after the Federal agency lowered US production forecast as well as global ending stock. However, on Friday, futures prices ended weaker, reducing significant gains earlier in the week. Traders reacted to the U.S. Department of Agriculture’s (USDA) revised production and stock estimates, which painted a less optimistic picture for both U.S. and global cotton output. Despite the pullback in futures prices on Friday, the December cotton contract still recorded a weekly gain, underscoring a positive trend over the last several trading sessions.
The highlight of the week for cotton traders was the USDA’s September World Agriculture Supply and Demand Estimates (WASDE) report. The report adjusted U.S. cotton production forecasts downward by 600,000 bales, bringing the total to 14.5 million bales for the season. U.S. ending stocks were similarly revised down by 500,000 bales, now expected to stand at 4 million bales. Globally, the USDA cut its production outlook by 1.2 million bales, with world ending stocks now projected to fall to 76.5 million bales.
These downward revisions initially fueled bullish sentiment in the market, as reduced supply typically supports higher prices. However, the upward momentum slowed by the end of the week, as traders saw some easing in buying pressure, which ultimately led to lower futures prices on Friday. The December cotton contract closed the day 0.56 cents lower, at 69.82 cents per pound, while March and May contracts also saw declines, closing at 71.24 and 72.41 cents per pound, respectively.
Despite the Friday dip, the December contract still posted a weekly gain of 194 points, reflecting the broader trend of recovery in the cotton market. Additionally, cotton posted a 1.5% increase for the month of August, snapping a four-month losing streak, suggesting that the market may be turning a corner after months of bearish pressure.
While production cuts helped buoy the market, other key indicators showed signs of weakness. Weekly export sales for the week ending September 5 dropped to 116,052 running bales, marking the lowest figure in three weeks. Similarly, shipments declined to 119,136 running bales, a five-week low, signaling softer demand from key markets. In another negative signal, USDA Cotton Ginnings data showed that only 466,700 running bales had been ginned as of September 1, a decline of 3.67% compared to the same period last year.
Further adding to the bearish tone, the USDA’s Crop Production report highlighted a decrease in U.S. cotton yields, with average yields dropping by 33 pounds per acre, which reduced overall U.S. production by 596,000 bales. These indicators of lower yields and softer demand contributed to the mixed performance in the cotton market.
As the cotton market navigates these fundamental changes, speculators have adjusted their positions accordingly. According to the latest data from the U.S. Commodity Futures Trading Commission (CFTC), large managed money speculators increased their net short positions by 6,827 contracts as of September 10, bringing the total to 49,492 contracts. This increase in short positions reflects ongoing bearish sentiment among speculators, despite some positive signals from the USDA’s revised production outlook.
ICE cotton stocks, meanwhile, remained unchanged at 265 bales as of September 12. The Cotlook A Index rose by 150 points to 81.10 cents per pound, indicating some strength in the global market. However, the USDA Adjusted World Price (AWP) was reduced by 127 points to 56 cents per pound, reflecting the downward pressure in the U.S. market.
Broader market trends also played a role in shaping cotton prices. The dollar index fell by 226 points during the week, making U.S. cotton more competitive in international markets, while crude oil futures edged up by 29 cents per barrel. Cotton prices tend to track crude oil closely due to the strong relationship between oil prices and synthetic fiber production, which competes with cotton.
Looking ahead, the cotton market faces a number of uncertainties. Traders are closely monitoring key support levels for the December contract, which range between 69.23/68.64 and 70.63/71.44 cents per pound. Ongoing concerns about weather conditions, demand fluctuations, and geopolitical tensions are likely to influence cotton prices in the near future. While the USDA’s revised production estimates have provided some support, the overall outlook remains uncertain, especially with export sales and shipment volumes showing signs of weakness.
In the coming weeks, the cotton market is expected to remain volatile as traders continue to assess the impact of these fundamental changes and monitor any shifts in global demand and supply.
(By Commoditiescontrol Bureau: 09820130172)