Mumbai, 8 Apr (Commoditiescontrol): Cotton prices continue to slide lower for the week ended Apr 5th, even as impact of the lower cotton crop planting in the U.S. was undermined by weak demand and sluggish export forecast. Further, the traders were seen trimming their net long position in cotton futures.
ICE cotton futures extend decline for the fourth straight session on Friday, reporting their biggest weekly fall in five months, weighed by sluggish demand, speculators exiting long positions and strong dollar denting the natural fiber appeal.
However, putting a floor under prices, global oil benchmark Brent prices stayed high as supplies faced fresh threats from escalating conflict in the Middle East. Higher oil prices make cotton-substitute polyester more expensive.
ICE Cotton contracts for May closed at 86.25 cents, 89 points lower. Jul settled at 87.82 cents, losing 75 points. Dec ended 87 point weak at 82.65 cents. May settlement contract recorded third straight week of loss, down 513 point or 5.6%. New crop futures continue to lead cotton futures lower.
Front month contract closed March a net 8.2 cents/lb in the red after setting new highs in Feb.
Certified cotton stocks, which can be delivered against the contract, were at 93,324 bales compared with 67,576 bales on April 1, according to ICE data.
The U.S. Department of Agriculture's (USDA) weekly export sales report on Thursday showed net sales of 84,900 running bales for 2023/2024, down 14% from the previous week but up 4% from the prior 4-week average.
Earlier, the USDA planting intentions said U.S. cotton planted area for 2024 is estimated at 10.7 million acres, below trade estimates of 10.9 million acres. However, the 2024 estimate was up 4% from last year. The report added that compared with last year, acreage increases are expected in most cotton-estimating States, except Georgia, Kansas, New Mexico, Texas, and Virginia. Texas and Georgia, the largest cotton-producing States, are both expecting a 1% decrease in area planted to all cotton.
NASS report suggested cotton planting finishing for Arizona at 6% and Texas as 5%. The 5-yr average pace would be 4% planted as of Mar 31.
U.S. private forecaster AccuWeather expects an above-average 2024 Atlantic hurricane season with a near-record number of storms and a greater-than-usual risk of direct impacts in parts of Florida, Texas and the Carolina, it said on Wednesday.
There's expectation for better demand, especially from India and China and the demand will impact the ending stocks even more. Yet, stifled demand due to high cotton prices above 90 cents, makes it difficult for mills to buy, which is pressurizing the market. A slight decrease in supply and demand is expected in the near term, with prices likely to remain volatile but will hold between 90-96 cents.
The USDA World Agricultural Supply and Demand Estimates (WASDE) report noted that 2023/24 U.S. cotton forecasts show lower production and ending stocks relative to last month. The report also showed global cotton consumption is almost 500,000 bales higher with gains for China and India.
USDA’s Ag Attache raised Brazil’s cotton production by 340,000 bales to 14.9 million, but cut carryout by 200,000 to 11 million. On net ending stocks were raised to 6.2m bales. The initial outlook for 24/25 cotton has area increasing to 1.87m HA and production up to 15.35 million.
Elsewhere, USDA raised its forecast for Australia's cotton production in the current season by 200,000 bales to 5 million and said the country would produce 5.5 million bales in the 2024/2025.
USDA’s weekly cotton market review had 4,700 bales sold on the week averaging 83.09 cents/lb. The Cotlook A Index was back down by 235 points to 95.60 cents/lb on Mar 28. The AWP weakened by another 140 points to 69.48 ICE certified stocks were 14,000 bales higher to 81,664 bales for Apr 1.
Cotton spec traders were shown 3,900 contracts less net long for the week after a bout of long liquidation. The CoT report had the group 80,600 contracts net long as of the settle. Commercial cotton traders were adding new hedges, though the shorts offset the new longs for a 4,000 contract swing to 127,600 contracts net short as of April 2.
As mentioned in the previous weekly report, the demand/supply factors are key determinant of cotton trade, and little support from technical indicators such as traders cutting long position and falling open interest. The skepticism about the U.S. cotton prices gaining traction this year is neutralised by China buying cotton from other countries such as Brazil and Australia. Traders trimming their net long position in cotton futures, suggests cotton prices have entered consolidation phase once again.
For Monday, support for the May Cotton contract is at 85.75 cents and 85.24 cents, with resistance at 87.18 cents and 88.10 cents.
(By Commoditiescontrol Bureau: 09820130172)
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