Mumbai, 18 Dec (Commoditiescontrol): Cotton complex follow a peculiar trend in recent times. Prices are up for a week and followed by loss in the next. That trend suggest prevailing uncertainty in the markets with regards its fundamentals - largely dominated by weak demand and ample output prospect. Currency indicators hardly looked to provide support, while crude's slide ensure the natural fiber staying on a slippery path.
ICE cotton futures extended fall on Friday, pressured by stronger dollar and slide in oil prices.
Sombre weekly export sales data from the U.S Department of Agriculture's (USDA) has already highlighted weak global demand for cotton.
ICE Cotton contracts for Mar closed at 79.93 cents, 88 points lower. May settled at 80.69 cents, losing 80 points. Jul ended 77 points weak at 81.17 cents. March cotton futures printed a 167 point range on Friday, and closed just 10 points off the daily low. That left the board 47 to 91 points in the red for the day, and March with a net weekly loss of 151 points or 1.84%.
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.
The dollar index was up 0.4%, making cotton less attractive to buyers holding other currencies. Oil prices eased, following sharp gains in the previous session. Lower oil prices make cotton-substitute polyester less expensive.
Trading volume have shrunk as well, since we are at the end of year, traders said.
The weekly Export Sales report showed 57,765 RBs of cotton was sold during the week that ended Dec 07. That was a 9-wk low for sales, which has also left the year’s commitment at 7.976m RBs, a 9% lag from last year’s pace. USDA also confirmed 13,600 RBs were sold for 24/25 delivery, leaving the forward book at 640,000 RBs – still half of the volue at the same time last year.
The World Agricultural Supply and Demand Estimates (WASDE) report on Friday projected world consumption for 2023-24 at 1.6 million bales lower due to a 1.0 million bales reduction in China. The world ending stocks was forecast 900,000 bales higher in December.
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. Meanwhile, the federal agency has cut domestic use by 150,000 and lowered the unaccounted line, for a net 100,000 bale tighter carryout of 3.1 million bales.
USDA’s weekly Cotton Market Review showed the 94,932 bales sold during the week averaged 77.27 cents/lb. The Cotlook A index for Dec 14 was 20 points stronger at 91.30 cents/lb. The AWP for the week was raised 204 points to 65.67 cents.
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.
Weekly Commitment of Traders data showed managed money firms were covering shorts during the week that ended 12/12. That extended their net long by 6,780 contracts to 9,009. Commercial cotton hedgers were 6,487 contracts more net short for the week, now listed at 47,691 contracts.
Of late, 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.
Analysts observation have aided us to suggest adopting cautious approach. China returning to market is helping to drive optimism intermittently. Its decided to stop auctioning cotton from state reserves as well, as per local report, has provided momentum to the markets. These moves should keep markets fairly supported at lower level. Another positive aspect is the Federal Reserve hinting at interest rate cut next year.
For Monday, support for the March Cotton contract is at 79.34 cents and 78.75 cents, with resistance at 81.01 cents and 82.09 cents.
(By Commoditiescontrol Bureau: 09820130172)
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