Mumbai, 11 Dec (Commoditiescontrol): Cotton traders have took heart from the bearish federal report that suggested drop in output. It did helped the natural fiber to close the week ended Dec 8th higher, snapping the previous two-week of losses. Some help was also provided by the dollar's weakness and the resurgence of crude oil during the week under review.
On Friday, ICE cotton futures softened, even as the key federal monthly supply-demand report showed a drop in yield, but prices were on track for their best week since late June. Cotton prices are hit by firm dollar index, up 0.2%, making cotton more expensive for overseas buyer.
ICE Cotton contracts for Mar closed at 81.44 cents, 115 points lower. May settled at 82.04 cents, losing 103 points. Jul ended 84 points weak at 82.45 cents.
The March contract printed a 200 point range from -147 to +54 points, before completing the week up 4.8% higher. In November, the natural fiber recorded their fourth consecutive monthly loss as overall demand remained lackluster.
Daily futures trading limits will expand to 4 cents per pound (400 points) since prices are back above 80 cents. USDA left the average cash price at 77 cents/lb.
USDA’s monthly data cut cotton yield by 18 lbs/acre to 765 – now the weakest since 2003, though similar to 2015. That on net reduced supply by 310,000 bales to 12.78 million. USDA cut domestic use by 150,000 and lowered the unaccounted line, for a net 100,000 bale tighter carryout of 3.1 million bales. On the world stage, the WAOB showed cotton production was 540,000 bales lighter and stocks were up by 900,000 bales to 82.4 million. USDA increased the Chinese import by 500,000 to 11 million.
The NASS Cotton Ginnings report showed 8.481 million bales were ginned through Dec. That is 9% behind last year’s pace and 17% behind the average pace. The weekly update from AMS showed 992,170 bales were classed this week for a season total of 8.805 million bales.
On Thursday, cotton prices hit their daily upper trading limit after a weekly report showed strong U.S. exports for the natural fiber. Cotton export sales commitments for 23/24 are now 7.918 million RB, which is 70% of USDA’s new forecast and trailing the 73% average pace for this point in the MY.
The USDA weekly export sales report showed exports up 57% from last week at 139,200 running bales (RB) even as net sales dropped 46% to 116,400 RB. Half of the net sales and around 40% of the exports were to the world's biggest cotton consumer China, the report showed.
Certified cotton stocks, which can be delivered against the contract, fell to 6,325 bales on Tuesday, from their highest level in over two years at 87,770 bales on Dec. 1, according to ICE data.
Meanwhile, Brazilian crop agency Conab lifted its forecast for Brazil's 2023/24 cotton production to 3.061 million metric tons from 3.039 million tons in November.
In recent times, cotton complex struggled to navigate lingering demand concerns and a good harvest season. These elements continue to weigh on the natural fiber market.
Pick up in the pace of harvest (currently 6% above normal), lack of many harvest disruptions, and a clear weather outlook have put some increased harvest pressure on the market, traders said.
The last NASS Crop Progress report for this year showed 83% of the US cotton harvest finished by 11/26, running 4% percentage points ahead of the average pace.
Cotton's planted area in Brazil was estimated to rise 14.9% year-on-year to 1.94 million hectares, while output was forecast to jump 16.4% to an all-time high of 3.74 million tons, agribusiness consultancy Agroconsult said on Wednesday.
Elsewhere, Australia Cotton lint output for summer harvests is expected to be down 26% to 925,000 tonnes, according to ABARES.
The Census confirmed cotton exports were 390,390 bales for October. That was a 41% drop from the Sep shipment and was 30% lighter than Oct ’22. The season’s sum reached 2.08m bales through the first three months, compared to 2.54m bales during last year.
USDA’s weekly Cotton Market Review showed there were 60,915 bales sold at spot this week at an average price of 75.86 cents. That had the season’s total cash sale up to 261,362 bales, compared to 108,700 last season. The Cotlook A Index for Dec 7 was 89.95 cents. The AWP for the week was lowered by 55 points to 63.63 cents/lb. ICE stocks were shown at 6,186 bales for Dec 7.
The weekly Commitment of Traders report had managed money funds as buyers in cotton during the week that ended Dec 15. That extended the group’s net long by 1,534 contracts to 2,229. Commercial cotton hedgers were adding short hedges for a 2,900 contract stronger net short of 41,204 contracts.
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.
The observation coutinue to help us to maintain in our view of staying cautious. 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 at lower level. Much would depend on the on-going hostility between Israel-Hamas. A wider escalation would turn a big negative for natural fiber.
For Monday, support for the March Cotton contract is at 80.66 cents and 79.89 cents, with resistance at 82.67 cents and 83.91 cents.
(By Commoditiescontrol Bureau: 09820130172)
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