Mumbai, 26 Dec (Commoditiescontrol): Cotton complex has once again succumbed to weak demand and from the lack of trader participation ahead of the long-week end as well as speculators reducing their long position. That's perfect recipe for price fall.
However, on Friday, the last trading session before Christmas Holidays, ICE cotton futures staged a smart recovery, advancing near one-week high, as a weaker dollar made the natural fiber more attractive to buyers holding foreign currencies.
ICE Cotton contracts for Mar closed at 79.76 cents, 63 points higher. May settled at 80.64 cents, adding 64 points. Jul ended 64 points strong at 81.07 cents. The front month cotton futures were 38 to 64 points higher. But, that hardly helped the board to end its losing streak. The March contract recorded a net weekly drop of 17 point or 0.21%.
The dollar fell against a basket of currencies hitting a nearly five-month low, making the natural fiber less expensive for buyers holding other currencies.
Prices were weighed down, in recent times, by sombre weekly export sales data from the U.S Department of Agriculture's (USDA) has already highlighted weak global demand for cotton.
Trading volume have shrunk as well, since we are at the end of year, traders said.
The U.S. Department of Agriculture's (USDA) weekly export sales report on Thursday showed exports of 222,300 running bales (RB) were at their highest level for the marketing year 2023/2024. That is still 22% behind last year’s pace, though the 8.12m RBs of total commitments is only 6% behind last year.
The report also highlighted net sales of 146,700 RB for 2023/2024 were up from the previous week, with nearly half of those sales to top consumer China.
Export Sales data from Thursday showed upland cotton bookings at a 10-week high of 146,671 RB during the week of Dec 14. That reflects the seasonal pickup in exports.
However, Ginning Mills activity lag considerably. Cotton Ginnings data from Friday showed US gins have processed 10.21 million RB of cotton as of December 15. That was the lowest for this period since 2015. That was an increase of 1.73 million RB in that 2-week period, the slowest first half December pace since 2011.
The Cotlook A Index weakened by 75 points to 89.45 for Dec 19. The AWP for the week is 63.80, down from 65.67 cents the previous week. It will be in effect until next Thursday. The ICE certified stocks for Dec 19 were 5,141 bales.
Meanwhile, in an update, ABARES suggest a 44% decrease on year for cotton area in Queensland (288,000 MT production) Australia and a 20% drop for New South Wales area (619,000 MT production) via the December update citing expected El Nino dryness.
USDA’s Crop Explorer’s WMO shows cotton area thus far remains above the seasonal average. ABARES has yields above trend, citing a larger portion of the crop in irrigation.
The FSA cut the Average World Price for cotton by 187 points on Thursday, to 63.80 cents/lb. The weekly Commitment of Traders report showed spec funds cutting 7,757 contracts from their net long in cotton for the week ending on December 19. That took the position to 1,252 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.
The markets will remain shut on Monday for Christmas Holidays.
Given the reduction in speculative long bets as well as analysts observations, we maintain cautious stance on the natural fiber. Lack of clear participation from the Chinese traders and deepening of crisis in the middle-east remain vital factors of staging any reversal of cotton prices.
For Tuesday, support for the March Cotton contract is at 79.04 cents and 78.33 cents, with resistance at 80.68 cents and 81.61 cents.
(By Commoditiescontrol Bureau: 09820130172)
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