Mumbai, 19 Aug (Commoditiescontrol): Cotton markets suffered a dual impact during the week ended to Aug 18th. While top consumer China experiencing sluggish economic conditions clouded demand outlook, recent rains in the U.S. key West Texas growing regions eased supply worries. Th twin blow suffice trigger selling among traders, encouraging them to raise bearish bets.
On Friday, a small uptick was caused some short-covering, higher oil prices and a dip in the dollar, which makes cotton less expensive for overseas buyers. Yet, ICE cotton futures settled the session mixed-to-little changed.
ICE Cotton contracts for October ended at 84.53 cents, up 17 cents. December closed at 83.63 cents, 2 cents lower. March settled at 83.54 cents, losing 4 cents. As observed in the recent times, all near-month active contracts have flipped into Backwardation - a situation were cash or near-end month quotes at a premium over far-end contracts. All contract have moved below psychologically important 85 cents mark after recording fourth straight session of decline, touching their lowest since Aug 3.
December contract was down 427 points, or 4.86%, for the week.
Cotton markets are driven lower by external forces with Chinese rate cuts and retail sales data adding further disappointment to the so-awaited 'reopening', dealers said. Bearish cues from wider equities and commodities markets in the past couple of days, dealers said.
Top consumer China lowered several key interest rates earlier this week in a bid to shore up struggling activity and is expected to cut prime loan rates on Monday, but analysts say moves so far have been too little and too late.
The U.S. export sales report tallied cotton bookings for 23/24 at 186,276 RB, taking the shipped and unshipped sales for the fresh MY to 5.126 million RB. Sales to China dominated the total, with 138,375 RB sold. Export shipments came in at 202,297 RB, a 56.83% increase over the previous partial week total. A total of 125,022 RB were headed to China. Cotton export sales commitments for 23/24 are 43% of USDA’s forecast, trailing the 53% average pace for early in the MY.
Investors are "studying some of the recent economic data that we've had, especially out of China. They're going to be a very important buyer for U.S. cotton.
On crop front, the condition ratings were down 5% top 36% gd/ex, as the Brugler500 was fell 20 points to 280 as poor/very poor ratings were up 9% to 43%.
Meanwhile, 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.
The FSA raised the Adjusted World Price for cotton by 89 points on Thursday, to 71.14 cents/lb.
In light of favourable crop update and weak exports data, the traders will be prompted to raise bearish bet. But, the CFTC data suggests different pattern. The weekly CFTC Commitment of Traders data showed spec traders in cotton futures and options adding 1,866 contracts to their net long during the week that ended on August 15. That took the position to 33,796 contracts as of Tuesday.
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.
Weak fundamental remains a major concern for cotton. China demand, US crop prospect, sluggish global economy are the prime factors that drive bearish outlook. Traders can take a close look at technical aspects as well before creating fresh short trade. Cotton may endure consolidation phase for long before breaking out the channel.
For Monday, support for the December Cotton contract is at 83.28 cents and 82.95 cents, with resistance at 84.20 cents and 84.79 cents.
(By Commoditiescontrol Bureau: 09820130172)
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