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MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended up last week led by strong US export sales data and also as a trade deal between US and China now looks imminent.
The most active May cotton contract ended up 0.8% to 78.25 cents per lb. The July contract too ended up 0.8% at 78.59 cents per lb. For the week Managed money seen adding long on technical buying whereas trade continued to increase short position for hedging new crop.
Cotton prices started the week on a bearish note as traders took profits after the recent run in prices. Just ahead of the week export sales data, traders preferred to square positions.
Thursday, the US Department of Agriculture’s export sales data showed cotton sales for the week to Mar 28 were at 322,100 bales, up 47% on week with robust purchases from China as well. Export sales are now at 93% of USDA’s projected export total of 15 million bales. This helped to market to recover its losses for the week and gaining 27 and 93 points on Thursday and Friday respectively thereby closing up by 64points for the week.
The strong numbers cheered markets and with the US-China trade deal nearing a finalisation, expectations are that sales may pick up further.
US President Donald Trump told reporters last week that a “monumental” deal with China is in the works and is likely to be announced in the “next four weeks”.
White House adviser Larry Kudlow on Friday said the trade negotiations could be carried out next week through video link.
Comments by officials will be closely watched for cues on the trade deal provisions.
Markets are also likely to be range-bound on Monday ahead of the USDA World Agricultural Supply and Demand Estimates that will be released on Tuesday. In March, USDA had the projected 2019 crop at 18.39 million bales. Ending stocks for 2018-19 were predicted 590,000 bales higher at 76.1 million bales.
A Bloomberg survey of eight analysts has predicted US cotton production in 2018-19 at 18.32 million bales. Any number lower than 18 million bales is likely to push prices higher. World cotton production estimate is likely to be revised higher to 119.02 million bales, the survey said.
Meanwhile, the “severe thunderstorm” forecast for southern regions and parts of Texas in the next few days could lead to flooding and push up prices.
Data released by the US Commodities Futures Trading Commission data(futures and options combined) for the week to April 2 showed managed money traders increased their net long position from 537 lots 8707 lots whereas trade increased their net short position by 11185 lots to 80670 lots trimmed short positions by 8,707 taking their net long positions at 8,707. Open interest for the week stood at 284,440, up 3,045 on week.
The market is likely to remain firm on optimism of China-US deal and strong export sales but gains will be limited as trade continue to increase their short position for hedging their new crop positions. Technically trend is up and market may test the level of 80-82 cents/lb support is at 77cents/lb.
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