MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended down as the weekly export sales data turned out to be disappointing.
The most active July cotton contract ended down 0.7% cents to 78.27 cents per lb. The December contract ended down 0.2% at 77.05 cents per lb. Volumes in the July contract stood at 14,564 compared with 27,651 a week ago.
Cotton started the week on a bearish note because of some technical selling. Later in the week, prices inched up on hopes that the US-China trade deal was nearing a conclusion. It also led to hopes of higher cotton sales to China.
A few days back the National Development and Reform Committee, China’s planning department, had approved cotton sliding tariff import quota of 800,000 tonnes for 2019. The announcement amidst the progressing US-China talks raised sentiment in the market. Last weekend, US Treasury Secretary Steven Mnuchin said that trade talks were nearing the “final round of concluding issues.
With these turn of events, expectations were building up in the run-up to the weekly export numbers. However, prices crashed on Thursday as the data turned out to be lower than expected.
According to the data released on Thursday, US net cotton sales were for the week ended April 11 were down 25% on the week and on year at 217,600 RB. Increases were reported for India at 78,700 RB, Vietnam at 76,900 RB, and Bangladesh at 26,000 RB among others.
For 2019-2020 crop, net sales of 20,600 RB were reported with purchases from Vietnam at 7,900 RB, El Salvador at 7,400 RB, and China at 4,400 RB. Net sales of the high-grade Pima cotton stood at 14,300 RB, down 53% from the previous week with China leading buyers at 5,700 RB. Despite the modest purchases by China, the market observed that China’s overall purchases had reduced compared with the previous weeks.
The dollar’s rise also pushed down cotton prices Friday. The June dollar index was up 0.5% at 97.151 making imports of US commodities such as cotton costlier for other countries, thereby reducing demand for it.
Data released by the US Commodities Futures Trading Commission (future and option combined) for the week to April 16 showed managed money traders increased their net short position by 3203 lots and reduced their long position 18 lots thereby by reducing their net long position by 3185 lots to 11,467 lots. Whereas Trade reduced their long and short position by 6059 and 5483 lots respectively their by increasing their net short position by 576 lots to 99185 lots. Open interest for the week stood at 255,462, down 21,753 on week.
Monday, traders will eye the weekly crop progress report. As on April 14, the USDA’s weekly planting progress report showed the 15 cotton-growing states in the US had planted 7% of the crop compared with 8% a year ago. Leading the plantings were Arizona, California, and Texas at 30%, 15% and 11% respectively.
As per media reports, farmers are likely to increase their cotton acreage as compared to corn this year.
Although heavy rains have lashed across the cotton belt, including Texas over the weekend, it could augur well for some parts in the midst of the planting season.
It should be noted that trade was adding their net short position by average 10000 lots/week since the week ending March 12 but that pace has reduced substantially this week and net addition to their net short was only 576 lots. Further India is consistent buyer since last two-three weeks and China is also expected to resume buying after the issue for fresh import quota . Reduction in addition of fresh short position by trade and continued buying by India and China could keep prices supported in near-term.Where as long term trend will depend on planting data and weather condtions.
The July contract could trade in the broad range of 77.09-79.63 cents this week.
(By Commoditiescontrol Bureau)
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