Mumbai, 8 Jan (Commoditiescontrol): Cotton complex settled the first week of 2024 lower as weak global demand continues to dent trader sentiment. The latest exports sales data not just fell short of expectation but it also showed the continuous decline in bookings.
ICE cotton futures ended marginally higher on Friday, as weaker dollar and upbeat sentiment on Wall Street helped counter a lackluster U.S. export sales report.
ICE Cotton contracts for Mar closed at 80.19 cents, 7 points higher. May settled at 81.35 cents, adding 3 points. Jul ended 3 points firm at 82.15 cents.
Front month cotton prices ended the session off the highs, though had kept 1 to 23 poitn gains at close. The March contract finished on a net 81 point or 1% loss for the week. The Dec contract closed the first trade week of the new year a net 7 points below last Friday.
The U.S. dollar lost 0.4%, making cotton cheaper for buyers holding other currencies. Oil prices rose by over $1, making cotton substitute polyester more expensive and lending further support.
USDA’s Export Sales data showed 131,100 RBs of cotton was shipped for the week ending Dec 28. That was down 65% for the week and was 24% below the 4-wk average. China was the top buyer for the week, but relatively quiet. USDA’s FAS data had commitments at 8.623 million RBs.
On weather front, NOAA’s 7-day QPF has heavy rainfall for the Gulf and as much as 10” accumulating for the Florida panhandle. Most of the inland cotton area can expect at least 2”, though Texas will miss out. The updated Drought Monitor still had most of Los Angles and Alabama in D3-D4 drought.
Meanwhile, the Cotton Growers Acreage Survey for 2024 shows intentions for 10.19 million acres vs. USDA’s 2023 figure of 10.23 million.
Last Friday's delayed Export Sales data was positive, as 369,857 RB were sold for export in the week that ended on December 21. That was a 7-week high in bookings and came with the help of China reemerging at 271,209 RB in purchases. Shipments were at a 24-week high at 230,981 RB as the seasonal pickup in exports continues. Cotton export sales commitments for 23/24 are now 8.492 million RB, which is 74% of USDA’s current cotton export forecast. That trails the 78% average pace for this point in the MY.
Elsewhere, reports from Mato Grosso show second cotton planting is underway. Some farmers have reportedly abandoned the soybeans to begin cotton planting.
The Seam reported 7,737 bales were sold online on Jan 3 for an average gross price of 72.82. The Cotlook A Index was 91.40 on Jan 2, unchanged from the day prior. The AWP was up by another 80 points to 64.96 cents/lb.
Cotton prices were weighed down, in recent times, by sombre weekly export sales data from the U.S Department of Agriculture's (USDA) has already highlighted weak global demand for cotton. Trading volume have shrunk as well, since we are at the end of year, traders said. The second-crop cotton represents 85% of the nation’s total cotton.
Brazil’s CONAB has cotton production at 7.429 MMT, a 3.5% drop from last year, and USDA’s WAOB is forecasting 14.56m bales output, a 24% increase from the year prior.
Last week, an update by ABARES suggested a 44% decrease on year for cotton area in Queensland (288,000 MT production) Australia and a 20% drop for New South Wales area (619,000 MT production) via the December update citing expected El Nino dryness.
USDA’s Crop Explorer’s WMO shows cotton area thus far remains above the seasonal average. ABARES has yields above trend, citing a larger portion of the crop in irrigation.
The weekly Commitment of Traders report showed cotton spec traders were 541 contracts more net short through the week that ended Jan 2. Spec trader OI dropped 3,400 contracts for the week. The weekly data release also had the commercials 953 contracts more net short at 40,729.
Next week will be a full one for the first time since before Christmas. On Thursday morning, we will get Export Sales data per the normal, non-holiday interrupted release. CPI data will be out on Thursday, with PPI released on Friday. Speaking of Friday, this one will be a little busier than most, with the release of the January WASDE, annual Crop Production, annual Winter Wheat Seedings, quarterly Grain Stocks, and Cotton Ginnings reports.
We have maintained in our previous reports, the analysts and traders have highlighted the fact that the U.S. cotton prices are unlikely to gain much traction this year despite lesser output as trade tensions have been pushing key buyer China to other cotton producers like Brazil and Australia.
Further, the reduction in OI as well as short bets and analysts observations, traders need to observ caution. Lack of clear participation from the Chinese traders and the crisis in the middle-east are key for cotton to stage reversal.
For Monday, support for the March Cotton contract is at 79.66 cents and 79.14 cents, with resistance at 80.64 cents and 81.10 cents.
(By Commoditiescontrol Bureau: 09820130172)
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