Mumbai, 26 Aug (Commoditiescontrol): Cotton markets ended higher for the week ended Aug 25th, recouping previous week losses, as fears of supply concerns fanned by hot weather in the key growing region of Texas in the United State prompted traders to cover short-position.
The effect of dry weather conditions are reflecting in poor crop setting and below average bolls open condition. These are key factors to drive prices higher during the week and triggered buying towards the week-end.
On Friday, ICE Cotton contracts for December ended at 87.31 cents, up 122 cents. March closed at 87.19 cents, 115 cents higher. May settled at 87.00 cents, adding 99 cents. There is no carry or inverse Oct to Dec. The contract gained about 4.3% so far this week.
Cotton is up on "continued poor weather for Texas and decent demand; it's not robust, but it's not poor either, traders said. The daily classings data had 18,751 bales classed in Texas on Aug 21.
The U.S. Department of Agriculture (USDA), in a weekly crop progress report on Monday, said 33% of the cotton crop was in good to excellent condition compared with 36% a week ago. The USDA added 81% of U.S. cotton was planted in the week ended Aug. 20, compared with 72% a week ago. The Brugler500 slipped 9 points to 271 as poor/very poor ratings were up 3% to 46%.
Power demand in Texas and other U.S. central states was on track to hit record highs this week as homes and businesses crank up their air conditioning to escape another brutal heat wave moving slowly across the country.
China is having problems but they continue to buy US cotton along with other sources.
The Export Sales report showed 38,900 RBs of old crop cotton was booked during the week ending Aug 17. New crop sales came in at 52,800 RBs led by Malaysia and Pakistan. USDA reported 204,000 RBs of cotton was shipped leaving total old crop commitments at 5.17m RBs through the first 3 weeks of reporting. New crop commitments were at 344,000 RBs ahead of 24/25.
Export Sales data 23/24 bookings slipping to 38,893 RB in the week of 8/17. Shipments during that week improved to 204,200 RB. Cotton export sales commitments for 23/24 are 44% of USDA’s forecast, trailing the 54% average pace for early in the MY.
Despite concerns over the Chinese economy, Beijing's recent purchases of U.S. cotton have been steady, according to data from the U.S. Department of Agriculture.
Support also seeped in from the agricultural markets as wheat and soybeans gained ground as hot and dry weather in the United States and other key exporting countries raised the prospect of lower yields. Also helping cotton, oil prices jumped more than 1%, making substitute polyester more expensive.
Though, the cotton prices are pressured by the relatively softer exports, and wider market anticipation for the Federal Reserve chairman's speech on Friday, prices could try to move higher because of concerns over the crop in the U.S. and India.
USDA’s weekly Cotton Market review had 7,270 bales sold at spot, bringing the season’s pace up to 16,700 bales compared to 6,700 LY. The average price for the week was listed at 80.06 cents/lb.
The Cotlook A Index for Aug 24 was up by another 145 points to 95.85 cents/lb. The FSA lowered the AWP for cotton by 208 points to 69.06 cents/lb. ICE certified stocks were 347 bales on Aug 21.
The weekly CFTC Commitment of Traders data showed spec traders in cotton futures and options dropping 5,000 longs and 1,600 new shorts. That reduced the group’s net long to 27,200 contracts as of Aug 22. The commercial traders had lifted hedges during the week, taking their net short down 7,700 contracts to 81,100.
Cotton has managed to stay above crucial level, the 80 cents mark, which provides fresh leg for the natural fiber to march higher. Initial target is 90 cents, but there are stiff resistance in between.
For Monday, support for the December Cotton contract is at 86.20 cents and 85.08 cents, with resistance at 87.96 cents and 88.60 cents.
(By Commoditiescontrol Bureau: 09820130172)
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