Mumbai, 7 May (Commoditiescontrol): The week ended to May 5th witnessed ICE Cotton futures rebounding sharply to clock their back-to-back second weekly gains led by pick-up in exports sales albiet crop progress report tried to rein-in prices.
Robust weekly U.S. exports and the end of natural fiber marketing season triggered shorts scurrying, while reigniting buying interest.
Monday’s Crop Progress report showed the US cotton crop planted 15% of as of April 30, which is 1% above the 14% average pace.
On Friday, ICE Cotton contracts for July 2023 finished at 83.90 cents, up 2.14 cents and December 2023 ended at 83.24 cents, 1.84 cents higher. Estimated volume was 51,340 contracts. All acive contracts collected triple digit gains of as much as 214 points. For July, that left the board with a 310 point gain for the weekend. Dec futures were 214 points higher at the close. For the week, July cotton was up 3.26 cents.
There were zero deliveries on the May futures. That contract expires this Monday, May 8.
One of the biggest positive was the weekly Export Sales data that showed 231,274 RBs of cotton was booked during the week ended April 27. That was up 18% for the week but was down 35% from the same week last year.
USDA mentioned China was the top buyer with over 117,000 RBs alone. New crop sales were reported at 26,928 RBs for the week with a forward book of 1.48 million. Weekly Shipments improved to a MY high 414,000 running bales (RB). Cotton export sales commitments are now 17% smaller than a year ago. Compared to the USDA projection, they are still on pace, at 106% of USDA’s WASDE forecast. The 5-year average pace would be 107% of that projection.
As far as spot trades are concerned, USDA’s weekly Cotton Market Review showed 8,945 bales were sold for the week that ended May 4. The season’s total sale at 607,299 bales. The report had the average cash price as 77.59 cents.
The Cotlook A Index was 175 points weaker on May 4 to 91.20 cents/lb. The AWP for cotton was 16 points higher to 66.69 cents/lb.
Earlier on Thursday, the The market entered the session slightly oversold as it was sharply lower Wednesday. Moreover, the managed-money funds were toting a deep net-short position, thus to some extent, the market was primed for a snap up. Thursday's jump prompted ICE Futures U.S. to expand cotton futures daily price limit to 5 cents per pound.
Lending support to the natural fiber, oil prices also rose, making polyester, a cotton substitute, more expensive.
Meanwhile, the U.S. Drought Monitor continues to show a worsening filed situation for West Texas. Some areas of the Southwest have severe drought readings. The immediate one- to five-day forecast has taken the rain out for a large swath of West Texas. However, the six- to 10- and eight- to 14-day outlooks still carry above-normal chances for rain.
The Commitment of Traders report showed managed money cotton traders were adding new shorts through the week that ended May 2. That left the group with a 21,888 contract net short as of the Tuesday settle. Commercial cotton hedgers did little to adjust their position, and were 27,709 contracts net short.
Next week, the government will release new CPI and PPI data. If those reports underpin the "inflationary story," then some traders may expect even higher interest rates from the Federal Reserve.
In recent times, Cotton complex faced the pressure from the recessionary fears which may get compounded by higher interest rates and fear of slow demand. Further, the slide in oil prices dampened the situation. Lower oil prices make polyester, a cotton substitute, less expensive. These trends encouraged analysts to term Cotton's immediate technical trend as "bearish". Moreover, cotton's open interest, reflective of trading participants, is beginning to increase as prices fall. Such behavior is a sign that new short-sellers are wading into the market. However, the bulls took this opportunity to make resurgence and corner bears. As long as the 'tug-of-war' continues, one can expect prices to make steady upward progress.
For Monday, support for the July Cotton contract is at 82.30 cents and 80.70 cents, with resistance at 85.01 cents and 86.12 cents.
(By Commoditiescontrol Bureau: 09820130172)
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