MUMBAI (Commoditiescontrol) - U.S cotton futures closed out 2017 with 10 consecutive weekly gains, and 8% for the month. The first month futures gained 11.3% for the year due to increased bullish bets by speculators.
The benchmark March contract settled at 78.63 cents/lb, on Friday, up nearly 1 percent over the week. The cumulative open interest on ICE futures increased by 7,730 lots to 273,886 lots week-on-week. Open interest in March contract added 2,260 lots 173,309 w/w, while reduced by 82 lots to 50,115 lots in May contract, but significantly increased by 3,658 lots to 18,179.
Net upland export sales for shipment this season of 163,700 running bales during the week ended Dec. 21 fell 50% from the prior week and 38% from the previous four-week average, USDA reported.
Increases were reported for India (47,700 RB), Vietnam (44,500 RB, including 2,200 RB switched from South Korea, 200 RB from Thailand, 200 RB from Japan, and decreases of 700 RB), Turkey (23,500 RB), Mexico (8,900 RB), and Taiwan (7,700 RB). Reductions were reported for Japan (1,100 RB) and Ecuador (400 RB).
Upland shipments quickened to a marketing year high of 276,700 RB, up 87% from the prior week and 64% from the four-week average. Shipments went to 23 countries, with primary destinations were China (70,400 RB), Vietnam (49,900 RB), Pakistan (26,800 RB), Turkey (22,600 RB), and Mexico (17,700 RB).
Net sales of Pima totaling 12,800 RB for 2017/2018 were up 14 percent from the previous week and up noticeably from the prior 4-week average. Increases were reported for China (5,100 RB), India (3,600 RB), Indonesia (2,000 RB), and Thailand (1,000 RB, including 200 RB switched from Japan).
The US will need to ship an average of more than 375,000 running bales per week for the remaining 31 week left to end the marketing year on July 31, 2018, in order for the USDA’s 14.8MK bale (480lbs) export target to be realized. Exports for the season stand at 3.039 million RB.
The most important thing for market players to keep an eye on on-call sales report, where around 11.78 million bales unfixed call sales are placed for the current marketing season Aug-Jul (2017-18). The current unfixed call sales is huge and thus the future market trend will be immesenly depend on how these position settled. The current positions is more three times of estimated US domestic consumption of 3.6 million bales and ending stocks of 4.7 million bales.
These sales represent a short position on NY futures and while mills have remained inactive during the initial phase of this bull run, they are now actively engaging in damage control via buying bullish options strategies. But as mills and other trade shorts are finding out, there is still a lack of willing sellers to accommodate all the buying that they, along with speculators, are trying to do.
One should also have to close eye on slow pace of shipment from US, as rising prices there could led to shift in demand towards India. At present there are only two main supplier of cotton i.e US and India.
Technical Ideas(March): The trend is up and higher price range of 79.66-81.94 to be tested. Hence, higher range can also be used to book profits. RSI hits the overbought zone of +70. Stochastic is already in overbought zone. MACD is rising. Volume has decreased in last 2 weeks and is lower than previous week’s volume. Violated of previous week low may halt the rise therefore traders long and holding the same can maintain the stop loss at 77. Higher range of 79.66-81.94 may witness profit booking.
(By Commoditiescontrol Bureau; +91-22-40015533)