Mumbai, 4 Jun (Commoditiescontrol): ICE cotton futures realized a sudden change in fortune during the truncated week to Jun 2. Thanks to the US Congress approving debt deal that has only helped calms the nerves but has provided much need boost for the markets to break away from the range trade. The cotton complex is stuck in 78-87 cent range.
For the major part of this year, markets were bogged down by macroeconomic factors, debt ceiling, increasing interest rates, major inflation, an economic slowdown, and all the ugly economic factors.
However, the congress clinching the debt deal and strong jobs data bolstered economic outlook, sending broader markets higher. This fueled buying activity in cotton, but strength of dollar checked overseas buying interest.
Yet, the natural fibre closed the week on higher note. Cotton complex benefited from the firm U.S. stock indexes after the U.S. jobs data, while investors cheered the country averting a catastrophic debt default. Further, the healthy export sales report confirmed the presence of Chinese buying last week. However, a strong U.S. dollar has hurt the cotton prices, trader said.
ICE Cotton contracts for July 2023 finished at 86.05 cents, down 0.37 cents and December 2023 ended at 81.85 cents, 0.27 cents higher.
July cotton futures were a net 270 points higher for the week, while Dec was up a net 131 points from Friday to Friday.
For the whole of this abbreviated week of trading, cotton has seesawed as traders continue to prepare for July cotton future's option expiration, as well as the end of the 2022/2023 season. There are 14 days till the expiration of July options. The contract will enter delivery on June 26.
The U.S. weekly export report for the week ending May 25 showed net sales of 267,800 running bales (RB) for 2022/2023, up noticeably from the previous week and 44% from the prior four-week average. Increases primarily for China (221,700 RB, including decreases of 2,400 RB), Turkey (20,800 RB), Vietnam (13,700 RB, including 2,100 RB switched from South Korea and 700 RB switched from Japan), Bangladesh (5,300 RB), and Indonesia (3,800 RB, including 900 RB switched from Japan), were offset by reductions primarily for South Korea (2,100 RB), El Salvador (1,200 RB), and Ecuador (700 RB).
USDA’s weekly Cotton Market Review had 11,437 bales sold this week at an average 80.31 cents/lb. The Cotlook A Index was 40 points lower on Jun 1 to 93.75 cents. The AWP for cotton by is 66.91 c/lb. ICE Certified stocks were 5,802 higher to 5,865 bales on Jun 1.
After rains in Texas, the drought conditions have gotten better but there is still small sub soil deficit in moisture, but the general situation seems to be much better.
The 1- to 5-day forecast calls for heavy rains across the Texas Panhandle. The 6- to 10- and the 8- to- 14-day outlooks hold above-normal chances for precipitation. However, the more extended 90-day outlook shows above-normal temperatures, with normal to below-normal rains.
Elsewhere, Ivory Coast exported 80,170 tonnes of cotton from January to April, down about 46.2% from the same period last year, provisional port data showed on Thursday.
Given adequate moisture, growers will devote the important level of management necessary to manage a cotton crop. With only 3.6 million bales of carryover, the July futures contract may see some fireworks within the coming three weeks. Certificated stocks have disappeared. This sets up the potential squeeze in July futures, making it very possible for July to jump higher the week going into first notice day. That appears to be the only possibility to again challenge the 87-88 cent level.
The weekly Commitment of Traders report showed managed money firms switched 3,200 contracts from long to short during the week that ended May 30. At the settle the group was 1,510 contracts net long on 69,000 open contracts. Commercial cotton hedgers were adding long hedges through the week which reduced their net short by 8,800 to 49,322 contracts.
For Monday, support for the July Cotton contract is at 80.40 cents and 79.65 cents, with resistance at 82.00 cents and 82.75 cents.
(By Commoditiescontrol Bureau: 09820130172)
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