ICE Cotton Faces Heavy Losses Amidst Favorable Conditions and Dollar Strength
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- Published: Wednesday, 12 June 2024 15:34
The ICE cotton market witnessed significant losses in the initial days of the trading week, continuing a downward trajectory influenced by multiple factors, including a robust dollar index and favorable weather conditions in the United States. Despite hopes pinned on surging crude oil prices, cotton futures remained vulnerable to a substantial sell-off, plunging to new yearly lows as market sentiment weakened.
Trade analysts reported that the US cotton July contract experienced a substantial decline, settling 203 points lower at 71.81 cents per pound (0.453 kg), while the December contract settled down 130 points at 71.59 cents on Monday. The downturn extended across all cotton futures contracts, breaching major support levels on the technical charts.
A strengthened dollar index, surpassing the 105 mark, exerted additional pressure on cotton futures, rendering US cotton purchases more expensive in the global market. Despite the rally in crude oil prices, typically seen as a supportive factor for cotton due to its impact on the polyester value chain, cotton futures failed to find reprieve. Nonetheless, it can be noted that the uptick in crude oil prices managed to somewhat mitigate the decline in US cotton futures.
Certified stocks, starting the day at 132,467 bales, registered an increase of 1,430 bales due to new certifications, with 4,128 bales awaiting review. Last week, certified stocks saw a net increase of 6,792 bales.
The USDA US Crop Progress report, released after market close, indicated that 80 percent of US cotton had been planted by June 9, aligning with the 5-year average. Cotton squaring stood at 14 percent, exceeding the 5-year average of 12 percent. Despite a slight dip from the previous week, the condition report highlighted that 56 percent of crops were rated as good or excellent, an improvement from the previous year's 49 percent.
Market participants are eagerly awaiting the US export sales report and the WASDE report to gain further insights into the demand and supply dynamics. With no significant changes anticipated in the cotton markets, pressure is expected to persist until there are signs of demand improvement.
On Tuesday, ICE cotton July 2024 showed marginal improvement, trading 0.15 cents higher at 71.96 cents per pound. Cash cotton traded at 68.06 cents (down 2.03 cents), the October (new crop) contract at 72.78 cents (down 1.42 cents), the December 2024 contract at 71.89 cents (up 0.30 cents), the March 2025 contract at 73.35 cents per pound (up 0.11 cents), and the May 2025 contract at 74.78 cents (unchanged).
In conclusion, ICE cotton continues to grapple with downward pressure, influenced by a confluence of factors including currency fluctuations, weather conditions, and market sentiment. While occasional upticks provide brief respite, the overarching trend remains subdued pending substantial shifts in demand and supply dynamics.