Mumbai, 19 MAR (Commoditiescontrol): Cotton had a rough time during the week to Mar 17th, as sluggish fundamentals and trader commitment weighed on the trad sentiment. In the past week, the gradual improvement from resilient US job readings, recovery in China following the relaxation of COVID restrictions, and a decline in crude oil prices from late last summer, the macro-economic outlook for the global recovery has hit a bump in the road. Falling industrial demand is a bad news for natural fibre.
ICE Cotton futures softened more than 2% on Friday, sliding to their lowest in over four months, as pressure from a downbeat stock market countered a weaker dollar while investors sought to reduce their exposure to riskier commodities.
ICE Cotton contracts for May 2023 finished at 77.83 cents, down 1.33 cents, July settled at 78.44 cents, down 1.26 cents and December 2023, ended at 79.51 cents, 1.12 cents lower; estimated volume was 36,754 contracts.
For the week, May cotton is down 0.35 cent on the week, down 6.20 cents on the month and down 5.62 cents for the year.
Volatile equity markets continued to guide cotton futures. Apart from weak appetite for risky assets, another negative factor for cotton is that farmers are stubbornly holding last year's crop. Thus, with the sharp fall in prices the foreign textile mills are slowing their buying pace to see how low prices might indeed fall.
From Thursday's export sales we note that cumulative sales for 2022-23 have reached 10.87 million bales, which is down from the 13.66 million of last year, and the lowest level since the 2015-16 season. Sales have reached 97% of the USDA forecast for the marketing year versus a five-year average of 95%.
Cotton export sales commitments are 20% smaller than a year ago. They are still 96% of USDA’s forecast for the full year, and only slightly below the average 98% commitment pace for the past 5 years. The FSA trimmed the Adjusted World Price for cotton by 337 points on Thursday, to 68.58 cents/lb.
USDA’s weekly Cotton Market Review showed the 9,240 bales sold this week averaged 77.44 cents/lb. That brought the total spot sales to 486,000 bales, compared to 1.49 million at this point last year.
The Cotlook A Index dropped 225 points on Mar 16 to 93.55 cents. The USDA’s FSA lowered the AWP for cotton by 337 points to 68.58 cents/lb.
Next week, the Federal Reserve will meet to decide interest rates. It will be an incredibly important gathering as the central bank must balance its actions between fighting inflation and nursing the banking crisis.
Commitment of Traders data showed money managers in cotton futures and options paring 4,092 contracts in a week from their recently minted net short position, putting it at 2,902 contracts as of March 7.
For Monday, support for the July Cotton contract is at 76.69 cents and 75.54 cents, with resistance at 79.15 cents and 80.46 cents.
Next week states off with the Monday morning Export Inspections report. Tuesday and Wednesday will be watched closely, as the FOMC meeting will be taking place and "to hike or not to hike" is the question.
(By Commoditiescontrol Bureau: 09820130172)
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