Mumbai, 29 Jan (Commoditiescontrol): On Friday, Cotton complex was very close to report its worst session in two months. Thanks to strong start to the week, the natural fiber managed to eek out gains during the week ended Jan 26th.
ICE cotton futures ended lower on Friday, retreating from more than three months, as sluggish U.S. exports prompted traders to take profit off the table. However, the natural fiber weaved its third consecutive weekly gain, amid rise in old crop's premium over new crop.
ICE Cotton contracts for Mar closed at 84.37 cents, 139 points lower. May settled at 85.63 cents, losing 135 points. Jul ended 127 point weak at 86.32 cents.
After the old crop contracts extended their premium through the week, futures faded by triple digits to the old crop’s Friday losses of 50 points. That left the March contract with a weekly gain of 42 points, the Dec contract with a weekly gain of 40 points and the old crop/new crop spread at 375 points.
With markets focus turning to Federal Reserve meet next week, the undercurrent remains tentative to rate decision announcement.
One key factor dominated the natural fibre prices was dollar. The greenback's rise make U.S. cotton more expensive for overseas buyers.
In recent times, Cotton absorbed some of the upbeat sentiment on Wall Street, where the main indexes gained after data reflecting strong economic performance in the fourth quarter boosted hopes of a soft landing.
Friday's exports data proved dampner for the cotton complex. The U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 207,000 running bales for 2023/2024, down 51% from the previous week, with nearly half the sales headed for top consumer China
USDA's report also said weekly exports of 142,200 bales were down 45% from the previous week, after having stayed above 200,000 bales in the last five reports and setting a new marketing-year record last week.
In recent times, the export data stayed strong above 200,000 bales in the last four reports, hovering close to the marketing-year record of 231,000 bales hit in the week of Dec. 21.
Cotton export sales commitments for 23/24 are now 9.306 million RB, which is 82% of USDA’s current cotton export forecast matching the 81% average pace for this point in the MY. Shipments thus far in the marketing year are ahead of pace at 33% of the USDA forecast vs. the 32% average.
USDA’s weekly Cotton Market Review had 95,183 bales sold for the week, quoting the average price at 81.24 cents/lb. The Cotlook A Index increased another back up by 65 points on Jan 25 to 94.45 cents. ICE certified stocks were 1,949 bales as of Jan 19. The AWP increased by 217 points to 67.64 cents for the week.
Meanwhile, the monthly Crop Production update showed cotton production 350,000 bales smaller than last month at 12.43 million bales.
That production also had WAOB trimming exports by 100,000 bales to 12.1 million, with the projected 23/24 carryout at 2.9 million bales, down 200,000. The world ending stocks were up 1.98 million bales to 84.38 million as they raised Chinese production and dropped consumption out of India, Indonesia, and Pakistan most notably.
The Cotton Growers Acreage Survey for 2024 shows intentions for 10.19 million acres vs. USDA’s 2023 figure of 10.23 million.
Elsewhere, reports from Mato Grosso show second cotton planting is underway. Some farmers have reportedly abandoned the soybeans to begin cotton planting. S&P Global sees 2024 U.S. all-cotton plantings at 10.675 million acres, according to a Reuters report.
The Friday Commitment of Traders report showed spec funds flipping to a net long by a total of 26,518 contracts, with a net long position of 24,502 contracts as of Jan 23. That was the single largest weekly bull move on record.
Cotton prices have managed to break the shackles of poor demand and analysts expectations. There was skepticism about the U.S. cotton prices gaining traction this year as impact of lesser output was neutralised by China buying cotton from Brazil and Australia.
Cotton has exhausted itself in the short term, but with the pace of export sales right now, it makes the case for holding above 80 cents going forward.
For Monday, support for the March Cotton contract is at 83.73 cents and 83.10 cents, with resistance at 85.43 cents and 86.50 cents.
(By Commoditiescontrol Bureau: 09820130172)
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