Mumbai, 25 Jun (Commoditiescontrol): Cotton prices continued with downward spiral during the week to Jun 23rd, their third straight-week of losses, due weak fundamental factors along with less supportive cues from outside markets. Global financial markets suffered losses following to more-than-expected rate hike by Bank of England. Further, concerns over China demand and a first cut in benchmark lending rates by Peoples' Bank of China spurred fears of deflationary pressure building into the price.
As a result, the ICE cotton futures lost more than 1% on Friday and settled near one-month low. A cocktail of factors, including a stronger dollar, weak U.S. export sales report, downbeat sentiment across wider equity and commodity markets, weighed on the natural fiber.
ICE Cotton contracts for July 2023 settled at 78.06 cents, down 1.23 cents and December 2023 ended at 78.67 cents, down 1.48 cents and March was 78.88 cents, 1.41 cents lower. Estimated volume was 29,857 contracts.
December gave back 148 points on Friday to close 143 points below last week. Dec also saw the lowest prints on Friday since March 24th. July ended the day down by 123 points for a weekly drop of 340.
Spot July will enter its delivery this Monday, meaning that existing open interest will be settled by taking delivery. Its expiration falls on Friday, July 7.
The drop in price was on anticipated line. It was a somewhat risk-off day for stocks and agriculture markets, as well as some negative trends for the oil sector, traders said. Lower grains are affecting cotton prices, they added.
The weekly Crop Progress report showed 89% of the US cotton crop planted as of 6/18, now 5% behind the 94% average pace. The crop was also seen at 19% squared, 2% behind normal. Condition ratings slipped lower this week by 2% to 47% gd/ex.
Further, we had relatively poor sales on the old crop, which applied pressure. The U.S. Department of Agriculture's (USDA) weekly export sales report on Friday showed net sales of 42,700 running bales for 2022/2023, down 57% from the previous week.
FAS reported 42,721 RBs of cotton were sold for export during the week that ended Jun 15. That was down from 99,000 RBs last week as a 25-wk low. New crop business was 187,615 RBs. The total forward book remains half of the volume coming into this season at 1.97m RBs.
USDA’s weekly Cotton Market Review had 6,082 bales sold this week for an average price of 76.71 cents/lb. The season’s total was marked at 731,500 bales compared to 1.621 million at this time last year. The Cotlook A Index was 15 points weaker to 92 cents/lb. The AWP was 65.50 cents/lb, down by 1.5 cents. ICE Certified stocks were 20,267 bales on Jun 16.
CFTC reported the managed money cotton net position as 5,522 contracts net short for Jun 20. That was a 6,000 contract swing back to net short, after a short lived 4-weeks of being net long. The commercial cotton hedgers removed 7,000 short hedges for the week and were shown to be 54,681 contracts net short for Jun 20.
The Cotton board will be back for a ‘normal’ schedule, before the July 4th holiday. USDA’s Export Inspections and Crop Progress reports will be back to their routine Monday release. Monday is also first notice day for July cotton futures.
Weather uncertainty remains a key issue going forward. A favourable change could lead the cotton prices lower. But, the focus will remain on July contract entering delivery mode. For the moment prices looks set to extend their downward journey.
For Monday, support for the July Cotton contract is at 77.90 cents and 77.12 cents, with resistance at 79.75 cents and 80.82 cents.
(By Commoditiescontrol Bureau: 09820130172)
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