Mumbai, 13 Aug (Commoditiescontrol): Cotton continues to be the shining star among agri-commodities during the week-ended to Aug 11. Much of these gains are attributed to sluggish crop scenarios and the depleting inventory levels. On Friday, the US Department of Agriculture (USDA) revised lower its forecast for global cotton ending stocks in 2023-24 to 91.60 million bales as compared to 94.52 million bales projected in July 2023. Further, the agency trimmed production forecast while adjusting higher its demand outlook for the natural fibre. All in all, the fundamental factors are pointing to a bullish trend in the commodity.
Apparently, on Friday, ICE cotton futures ended higher. While poor crop outlook in the growing region continued to lend support, a firm demand expectation kept floor under prices. Meanwhile, the strong US dollar checked further gains in cotton, as it makes buying cotton dearer for overseas buyers.
ICE Cotton contracts for December ended at 87.89 cents, up 174 cents. March closed at 87.67 cents, 152 cents higher. May settled at 87.54 cents, adding 130 cents. December was up 360 points or 4.27%, for the week.
As observed in the recent times, all near-month active contracts have flipped into Backwardation - a situation where cash or near-end month quotes at a premium over far-end contracts. All contracts have moved above the psychologically important 85 cents mark.
The USDA cut both harvested acreage and yield. The agency forecast a sharp 2.5 million bale cut to the US production total, now at 13.99 million bales. Old crop carryout was raised by 450,000 bales to 3.7 million, as exports were trimmed by 100,000 and the ‘unaccounted’ for column was tweaked. That helped to offset the lost production, as a 1.3 million bale cut to new crop exports took the 23/24 US carryout to 3.10 million bales, down 700,000.
The weekly exports sales report was little better than last week, and the U.S. dollar is down, which is helping cotton prices, traders said.
The U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 277,700 running bales of cotton for 2023/2024, with increases primarily for China.
Shipments between the two MY in the 7-day week totaled 324,800 RB. Cotton export sales commitments for 23/24 are 44% of USDA’s forecast, trailing the 51% average pace for early in the MY.
Weekly Crop Progress data indicated 63% of the cotton crop setting bolls, matching the average pace, with 8% of the crop with bolls open. Condition ratings were launched at 41% gd/ex, as the Brugler500 was down 3 points to 300 on a 3% shift from fair to poor.
Meanwhile, the USDA increased abandonment by 910,000 acres and cut yield by 52 lbs/acre. That slashed output by 2.5m bales to 13.99 million. Old crop stocks were loosened by 450,000 to offset some of the supply loss, as unaccounted is now negative 330,000 bales. New crop usage lost 1.25m bales to export for a net 700,000 bale tighter carryout.
USDA’s weekly Crop Progress report had 92% of the cotton crop squaring as of Aug 6. That is 1% point behind average. The report showed 63% were setting bolls matching the average.
NASS found that 8% of bolls were opening as of Aug 6 which is 1ppt behind the average pace. The Brugler500 Index showed conditions were 3 points lower to 300 flat – reflecting worse conditions in Louisiana, Oklahoma, and Texas.
USDA’s weekly Cotton Market Review had 3,956 bales sold at an average gross price of 80.96 cents/lb. The Cotlook A Index was shown at 95.90 cents for Aug 9, down by 15 points. The updated AWP for cotton is 70.25 cents/lb, from 70.19c last week. ICE Certified Stocks for Aug 9 were 380 bales.
The weekly CFTC report had managed money with a 31,390 contract net long. That was down 4,400 from the week prior on net new selling. The commercials lightened their net short by 4,500 contracts with new long hedges in place – to 88,659 as of Aug 8.
On the weather front, rains in the northern and eastern Delta and Southeast this week should improve moisture for cotton, weather forecaster Maxar wrote in a weekly note.
For now, the cotton complex is enjoying bullish momentum provided by the WASDE report. That should keep prices faily supported at current levels, any favourable change to weather update in growing regions can damage price prospects. We may see selling pressure building up and the managed fund reducing their position is a better signal to stay light on markets.
For Monday, support for the July Cotton contract is at 85.65 cents and 83.41 cents, with resistance at 89.48 cents and 91.07 cents.
(By Commoditiescontrol Bureau: 09820130172)
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