Mumbai, 15 Jul (Commoditiescontrol): After three consecutive week of losses Cotton prices bounced back to end July 14th week marginally higher. The natural fiber received support from the dollar recording its biggest weekly decline since November against a basket of six major currencies. Further, the strength of equities and grain markets bolstered investor sentiment.
On Friday, ICE cotton futures ended lower, as combination of strong dollar and weaker demand, dented trader sentiment. ICE Cotton contracts for December ended at 81.22 cents, down 46 cents. March closed at 81.35 cents, 40 cents lower. May settled at 81.32 cents, losing 41 cents. Near-month active contracts have maintained contango - a situation were cash or near-end month quotes at a discount over far-end contracts - while staying above psychologically important 80 cents mark.
But for the week, cotton prices were up 0.5% thus far, supported by gains in wider equities and grains markets.
Though, the US dollar's rebound on the last session of the week made buying cotton a little bit hard, dealer said. On a weekly basis, the greenback stayed softer. On Friday, the dollar index edged up 0.2% to 99.923, after touching a 15-month low of 99.574 earlier. It was down 2.3% for the week. Weaker dollar makes the natural fiber affordable for overseas buyers.
Having said that, the US export sales data continues to offer worrisome outcome. The weekly export sales report released Thursday morning, came in slightly negative and the market is also continuing to trend downward as a result Wednesday's poor USDA report.
The U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 23,100 running bales (RB) for 2022/2023, down 79% from the previous week and 76% from the prior 4-week average. "Exports of 1,400 RB were down 67% from the previous week and 76% from the prior 4-week average," the USDA report added.
That was the weakest sale since net cancelations in December. New crop sales were shown at 51,000 RBs for a net forward book of 2.309 million. That is half the forward volume from the same time last season.
Crop Progress data from Monday showed condition unchanged at 48% gd/ex. The Brugler500 was down 6 points to 321, as there was a shift from fair to poor/very poor.
Meanwhile, the USDA, in its July World Agricultural Supply and Demand Estimates (WASDE) report on Wednesday, said 2023/24 exports are reduced 250,000 bales due to reductions in projected world trade and U.S. market share.
Global consumption, meanwhile, was projected 550,000 bales lower as reductions for China, Bangladesh, Turkey and Vietnam more than offset improved prospects for Pakistan, the WASDE report added.
The monthly WASDE updated from USDA showed production unchanged, as harvested area was raised and yield cut. Old crop carryover was up 0.05 to 3.25 million bales. That along with a 250,000 cut to new crop exports took the 23/24 ending stocks total to 3.8 million bales, up 300,000 bales.
USDA’s weekly Cotton Market Review had 13,968 bales sold in the DSQ system for the week at an average price of 76.52 cents/lb. The Cotlook A Index was 20 points lower to 91.90 cents/lb on July 13. The AWP was lowered 56 points to 64.94 cents/lb. ICE certified stocks were 8,926 bales as of July 13.
On weather front, improved weather conditions in cotton growing region, particularly Texas, and the recent downtrend in equities have checked cotton prices, dealers said. The six- to 10-day forecast for West Texas calls near-normal temperatures and above-normal rainfall. The extended eight- to 14-day outlook indicates slightly above-normal temperatures with normal precipitation.
The Commitment of Traders (CoT) data showed large money managers covering another round of shorts during the week that ended on July 11 by 10,306 contracts. They flipped their position to net long 2,049 contracts as of Tuesday.
Certain technical momentum indicators, after having fallen to their lowest levels since November 2022, are looking to stage a comeback. Such movements could encourage traders in bargain buying. Much of this will depend on exports sales data and the way markets handle August grain option expiry.
For Monday, support for the July Cotton contract is at 80.44 cents and 79.67 cents, with resistance at 82.30 cents and 83.39 cents.
(By Commoditiescontrol Bureau: 09820130172)
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