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ICE Cotton Marks A Double Digit Fall As Coronavirus Cases Spike

14 Feb 2020 7:30 am
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Mumbai (Commodities Control) – Cotton futures fell more than 1% on Thursday after a sharp rise in coronavirus cases in China rekindled fears of its impact on the global economy, overshadowing positive export sales data from the U.S. government.

The cotton market finished lower on Thursday amid outstanding exports-sales data. As reported by USDA, weekly sales of 350,000-plus were the second marketing-year-high report of the last three weeks.

Cotton contracts for March settled down 83 points at 67.75 cents per lb. Prices marked their biggest one-day percentage decline since Jan. 31. It traded within a range of 67.72 and 68.57 cents a lb. May Cotton closed at 68.63, down 61 points. July Cotton closed at 69.5, down 57 points. October Cotton closed at 69.59, down 58 points.

Additionally, sandwiched in between those huge sales were last week’s marketing year-high for shipments. Nonetheless, market participants chose to ignore this strong business, opting to trade the unknown fear of the coronavirus.

"There is an overhang in the entire market from weakness in Chinese domestic markets and the fear that not only will cotton imports be affected but also that cotton yarn imports will be affected," said Ed Jernigan, chief executive of Jernigan Global, a cotton textile supply chain manager.

In central China's Hubei province, officials said 242 people died on Wednesday, the biggest daily rise since the flu-like virus emerged in the provincial capital Wuhan in December.  

Cotton futures had climbed to a more than eight-month high of 71.96 cents per lb on Jan. 13, bolstered by optimism around the signing of a Phase 1 U.S.-China trade deal.

But the epidemic has constrained the world's second-largest economy.

The U.S. Department of Agriculture report showed that net sales hit a marketing-year high of 350,900 running bales for 2019/2020, up 6% from the previous week and 15% from the prior 4-week average.

New crop cotton bookings were 57,256 RBs, which was a 12-week high. Combined net sales for cotton were 21.1% higher wk/wk, and 115.1% higher YoY. Upland cotton exports on the same week were 400,463 RBs were down 4% from the previous week, but up 20% from the prior 4-week average.

Exports to China accounted for 11.51% of the total as 52,183 RBs were shipped on the week. 

"A pretty good demand structure has been priced in and so its just about growing the crop at this point," said John Payne, senior broker at Daniels Trading.

Monday is a federal holiday (Presidents Day) and the market will be closed. Thus, it may be a tad too scary for any new buyer to step in ahead of a three-day weekend.

On Saturday, the NCC will end its convention by announcing its membership survey regarding 2020 acres. We will have that number in our next update on Tuesday morning.

Total futures market volume fell by 1,995 to 55,557 lots. Data showed total open interest fell 4,300 to 220,310 contracts in the previous session.

Support and Resistance for Cotton #2 lies at 68.03 cents and 69.59 cents/lb, respectively.

(Commodities Control Bureau)

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