Mumbai, 8 APR (Commoditiescontrol): Cotton futures were on the roll during the truncated week to April 3rd, extending last week’s strength, as behind schedule progress of the U.S. cotton crop progress amid warmer weather conditions in growing region triggering short covering process.
ICE Cotton futures rallied on Thursday, the markets were shut on Friday, adding more than 2% as recent fall to one-week low led the short covering while softer dollar made natural fibre cheaper for non-dollar buyer.
ICE Cotton contracts for May 2023 finished at 83.20 cents, up 2.13 cents July settled at 83.47 cents, up 2.18 cents and December 2023 ended at 83.24 cents, 1.62 cents higher. Estimated volume was 59,969 contracts. For the week, the May contract settled up another 42 points(0.51%). Options on the May cotton futures expire on April 14 or Friday next week.
The cotton complex received support from speculative buying due to long week-end.
Funds, specs and bargain hunters were demonstratively on the buy side Thursday; it also helped that the U.S. dollar was lower and the Dow Jones was higher. Support also came from the oil market. Higher oil prices make polyester, a cotton substitute, more expensive.
Lastly, Thursday morning export sales were deemed respectable. Although the numbers were below those of last week, both China and Vietnam were the headline buyers. With that, cumulative sales for 2022-23 have reached 102% versus a five-year average for that week of 99%.
On Fundamental front, the Monday’s U.S. Crop Progress report showed 4% of the cotton crop planted as of April 2, behind the 4% average pace. With the 2023 crop being seeded, the pressure is on to sell that old crop supply. This is not the first time the cotton market has acted contra-seasonally. In 2018 and 2019, from their harvest averages, both of those respective seasons saw prices plummet into June.
Texas soil conditions are very dry, with no rain in its five-day forecast. However, something of a change in the weather pattern now has both the six- to 10- and the eight- to 14-day models with above-normal precipitation in their respective forecasts.
The weekly Export Sales report showed sales slowing again this last week to 160,457 RB in the week that ended on March 30. Shipments also backed off to 250,100 RB.
Cotton export sales commitments are now 19% smaller than a year ago, mainly due to the smaller supply. Compared to the USDA projection, they are still on pace, at 103% of USDA’s March WASDE forecast, matching the average.
The monthly Census export update tallied February cotton shipments at 1.374 million bales, a 7-year low. The FSA increased the Adjusted World Price for cotton 204 points on Thursday, to 69.88 cents/lb.
The U.S. markets were shut on Friday in observance of Good Friday/Easter. However, the Labor Department release its monthly jobs report on Friday morning, which was marginally above estimates. This number will play a key role as to the Federal Reserve's decision on interest rates at its May meeting.
On Monday, USDA will continue its crop progress report, tracking the planting of the 2023 crop. Then, on Tuesday, USDA will update its supply-demand number via the April WASDE.
Next week will also bring fresh CPI and PPI inflation data. No doubt these reports will play a pivotal role at the Federal Reserve's May meeting.
CFTC's Commitments of Traders report will be released in the afternoon. At last count, the mnanaged-money traders were net short some 23,475 contracts.
The Cotlook A Index was 94.85 cents on April 5, down by 140 points. The AWP for cotton is 67.84 cents/lb through Thurdsay.
Cotton complex continues to enjoy favourable fundamental scenario. Except for Federal Reserve decision on rate hike next month, nothings seems can prevent the commodity from marching upwards.
For Monday, support for the July Cotton contract is at 81.79 cents and 80.38 cents, with resistance at 84.02 cents and 84.84 cents.
(By Commoditiescontrol Bureau: 09820130172)
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