Mumbai, 20 Nov (Commoditiescontrol): Cotton has managed to tide over recent weakness helped by renewed buying which strengthened demand prospects. As a result, the natural fiber prices ended the week to Nov 17th higher, managing to claw back some of the previous losses. Softer dollar and firm oil prices provided additional support.
ICE cotton futures ended higher on Friday, posting their biggest weekly gain in two-and-a-half months, as surge in crude oil prices, softer dollar triggered short-covering. The cotton complex prospects are already bolstered by a strong U.S. weekly export sales data. However, persisting demand concerns continues to cloud the natural fiber's outlook.
ICE Cotton contracts for December ended at 78.92, up 24 cents. March closed at 81.51 cents, 63 cents higher. May settled at 82.19 cents, adding 56 cents. Dec contract added 110 cents or 1.4% for the week. Meanwhile, December cotton options expired on Friday and are now at a net 71 point discount to spot futures.
Softer dollar and strong oil markets influenced natural fiber prices negatively. Weak green-back makes cotton cheaper for overseas buyers; while firm crude oil makes polyester, a cotton substitute, more expensive. Last week, cotton prices fell to six month low on weak China demand outlook.
The cotton market is range bound after last week's retreat, demand is still not good enough, traders said.
The U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 328,300 RB for 2023/2024 were down 17% from the previous week, but up 18% from the prior 4-week average. Primary increases were for China.
The report also highlighted that exports of 112,900 RB were up 25% from the previous week and 5% from the prior 4-week average.
China returning to market is also driving optimism. China will stop auctioning cotton from state reserves from Nov. 15, according to an announcement posted by the China Cotton Reserves Management Company.
The U.S. Department of Agriculture's weekly crop progress report released on Monday showed 67% of the cotton crop had been harvested in the week ended Nov. 12, compared with 57% in the prior week.
USDA raised the national average cotton yield by 16 lbs/acre to 783. That lifted production by 270,000 bales to 13.09 million. Domestic use was also cut by 100,000 bales, lifting stocks by 400,000 from October to 3.2 million. Global numbers saw an 860,000 bale increase to 113.5 million. Carryout was 1.58 million bales looser at 81.5 million. The weekly Crop Progress report showed 57% of the cotton crop harvested by last Sunday, 2% above the average pace.
USDA’s monthly Cotton Ginnings report showed 3.656m bales were ginned as of Nov 1. That is down 14% from last year’s pace, but compares to 3.543m during 21/22.
USDA’s FAS reported 395,170 RBs of cotton was sold for export during the week that ended Nov 2. That was down from the MY high last week but was up from 146,000 RBs during the same week last year.
USDA’s weekly Cotton Market Review showed 18,040 bales were sold at spot during the week, averaging 73.79 cents/lb. The season’s total sale was marked at 148,028 bales, compared to 57,375 last year.
The Cotlook A Index was 15 points lower to 90.90 cents/lb. The new AWP is 64.23 cents/lb. ICE certified stocks for Nov 16 were 86,868 bales.
Managed money firms were adding shorts in cotton during the week that ended Nov 14, according to the Commitment of Traders data. That flipped the group from an 8,700 net long to a 5,899 contract net short. Commercial traders were closing hedges in near equal order. With 35,000 fewer hedges in place, the net short was 504 contracts weaker to 45,517.
Analysts and traders have highlighted that U.S. cotton prices are unlikely to gain much traction this year despite lesser output as trade tensions have been pushing key buyer China to other cotton producers like Brazil and Australia.
As observed in this report, China returning to market is driving optimism. The largest buyer of U.S. cotton has decided to stop auctioning cotton from state reserves as well, as per local report, which favours markets for now. These moves should keep markets fairly supported.
For Monday, support for the March Cotton contract is at 80.67 cents and 79.83 cents, with resistance at 82.11 cents and 82.71 cents.
(By Commoditiescontrol Bureau: 09820130172)
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