Mumbai, 6 Aug (Commoditiescontrol): Cotton succeeded in defying the broader market trends by closing the week to Aug 4th marginally higher helped by non-supportive weather conditions denting crop prospect. Natural fiber made a strong gains in earlier part of the week, however, poor demand outlook and increased selling arrested price surge.
On Friday, ICE cotton futures settled lower on demand fears amid commercial traders increasing shorts to hedge their positions, traders said.
However, dry weather conditions in growing region is seen hurting output while dollar's firmness, weak exports data are guiding traders to raise bets on price drop.
ICE Cotton contracts for October ended at 84.29 cents, down 41 cents. December closed at 84.40 cents, 41 cents lower. March settled at 84.50 cents, losing 38 cents.
Yet, the December contract eked out gains of 3 cents for the week. This is attributed to slow crop progress. The near-month active contracts have flipped into contango - a situation were cash or near-end month quotes at a discount over far-end contracts. All contract have also slipped below psychologically important 85 cents mark.
Weather conditions have remained quite unsupportive for crops. Though, NOAA’s 7-day quantitative precipitation forecast (QPF) has shown a rainfall for Alabama and Georgia amounting to pockets of +3”, but Texas (largest cotton production state) and Oklahoma remained mostly dry through the week. That's not healthy sign for cotton crop.
Weekly Crop Progress data indicated 47% of the cotton crop setting bolls, 3% behind normal. Condition ratings were down 5% at 41% gd/ex. The Brugler500 was down a whooping 18 points to 321, as poor/very poor ratings increased 7%.
This week’s Export Sales report by the U.S. Department of Agriculture (USDA) showed old crop cotton with net reductions of 9,900 RB in the final full week of the 22/23 MY, with new crop sales a poor 33,900 RB. That left total commitments at 13.95m RBs – an 11% lag on year. The marketing year ends July 31, which is next week for the Export Sales report.
Shipments pulled back to the lowest since February at 194,600 running bales (RB). Cotton export sales commitments are 11% smaller than a year ago. They are 114% of USDA’s forecast, 1% below the average pace.
The weekly Cotton Market Review reported 3,094 bales were sold at spot for an average price of 80.21 cents/lb. The Cotlook A Index was 165 points weaker on Aug 3 at 95.60 cents. The FSA raised the Adjusted World Price for cotton by 45 points on Thursday, to 70.19 cents/lb while ICE Certified Stocks were reported at 560 bales.
This week, Cotton complex felt the brunt from stronger dollar and weakness in financial markets across the globe, as well. The dollar rose to a more than three-week high after strong U.S. economic data, making cotton more expensive for other currency holders. Selling pressure across global equities and Wall Street following US credit ratings by Fitch is weighing down cotton.
Wall Street fell on Wednesday after rating agency Fitch's move to downgrade the U.S. government's credit rating hit appetite for risky assets around the world. Oil prices also eased. Lower oil prices make polyester, a cotton substitute, less expensive. However, oil prices rose for sixth stright week on tight supplies.
Meanwhile, China will release 10,002.3755 metric tons of cotton from its state reserves on Aug. 3, the China Cotton Reserves Management Company said.
The weekly Commitment of Traders (CoT) update had cotton spec traders were net new buyers in the cotton market during the week that ended Aug 1. The 7,500 new longs left the group 36,365 contracts net long, the largest since late last September. Commercial cotton hedgers added shorts for a 6,800 contract stronger net short of 93,197.
Next week, the government will realse CPI & PPI data. On Friday, the USDA will release Crop Production and WASDE reports.
Cotton complex will continue to follow broader market sentiments and seek details on fundamental side from the USDA. Prices have so far managed to stay afloat above 80 cents mark, after have breach that level in the previous week. One can expect range movement in coming days.
For Monday, support for the July Cotton contract is at 83.69 cents and 83.08 cents, with resistance at 85.02 cents and 85.74 cents.
(By Commoditiescontrol Bureau: 09820130172)
0 Comments 
Post Comment 
