Mumbai, 5 Feb (Commoditiescontrol): Cotton complex performance during the week-ended Feb 2nd was exactly opposite of its previous week. The last trading session of previous week saw traders dumping their position while during the recently concluded week they were seen scampering for reducing short position or opening fresh longs. Such was the strength of resurgent cotton export sales data.
ICE cotton futures ended higher on Friday, posting their fourth straight week of gains, aided by a string of robust U.S. exports and bullish bets from speculators.
The latest weekly data from the U.S. Department of Agriculture (USDA) showed a jump in sales and another marketing-year high for exports.
ICE Cotton contracts for Mar closed at 87.11 cents, 62 points higher. May settled at 88.15 cents, adding 51 points. Jul ended 45 point strong at 88.70 cents.
The cotton market ended the last trade day of the week with 45 to 62 point old crop gains and 6 to 10 point new crop gains. March contract netted 274 point or 3.25% for the week while Dec added 130 point or 1.49% gain. The fourth straight week of gain has marked the most consecutive weekly increases in two years. Even prices increased more than 5% in January, their best month in eight.
Strong demand conditions, even as Chinese economy continuing to limp, surprised traders and forced them to cover up short positions, dealers said.
Improvement in demand situation reflected in recent export data released by the U.S. department of Agriculture (USDA). The federal agency weekly sales report showed net sales for 2023/2024 of 349,400 running bales, up 69% from last week, while exports climbed to another marketing-year high of 396,700 bales. Weekly shipments had stayed above 200,000 bales in five of the previous six reports. Total old crop commitments sit at 9.86m RBs, which remains 4.3% ahead of last year’s pace.
The data points to "very good sales again in a long line of good sales for three months ... and finally, the shipments have caught up," said a trader.
One key factor dominated the natural fiber prices was dollar. The natural fiber held on to its gains despite a 0.9% higher dollar index, which makes U.S. cotton more expensive for overseas buyers.
USDA’s weekly Cotton Market Review had 30,988 bales sold for the week with an average price of 81.35 cents/lb. The Cotlook A Index was 130 points lower to 93.55 cents/lb on Jan 29. The AWP increased by 217 points to 67.64 cents for the coming week. ICE certified stocks were only 999 bales as of Jan 26, with the March contract delivery period just a few weeks away.
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.
Meanwhile, NOAA’s update 7-day QPF has more rainfall for the Texas/Los Angeles Gulf, with accumulations of as much as 4”. Most areas, including North West. Texas and Oklahoma, will expect to receive 1”. Northern Mississippi/Alabama/Georgia will mostly miss out.
StoneX announced their estimate for Brazil’s 22/23 final cotton output as 3.33 MMT, which would be a 5% increase on year.
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.
Speculators switched to a net long position of 21,976 contracts in ICE U.S. cotton futures in the week of Jan. 23, the Commodity Futures Trading Commission said last Friday.
Traders looked to the USDA's World Agricultural Supply and Demand Estimates report for February due next week.
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 86.17 cents and 85.22 cents, with resistance at 87.69 cents and 88.26 cents.
(By Commoditiescontrol Bureau: 09820130172)
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