US Cotton Futures Take A Sharp Plunge

Market Intelligence

US Cotton Futures Take A Sharp Plunge

Cotton

US cotton futures jumped in third week of January only to drop by a steep 3.5% in the last week after the March contract rallied almost continuously since November. Mills were getting squeezed on unpriced call positions against March futures. A weak US$ was also providing the most tail wind. As March options expire in February and USDA Export Sales report showing weekly upland cotton sales near the marketing year low, totaling 67,684 bales for old crop. That’s 85.2% lower than what was reported in the corresponding period a year ago and 75.4% reduction from the previous week. The managed money spec funds trimmed 616 contracts from their CFTC net long position in this reporting period, pegging it at 108,162 contracts on 23 January after being record high in the prior week. March contract closed at US cents 80.48 per pound in the last fortnight, down US cents 1.20 while May finished at US cents 81.22 per pound. In the third week of January, US cotton futures on the ICE had gained nearly more than 2%, supported by mill buying and continuing to be the strongest agricultural commodity with its bullish momentum.

Cotlook A index, the global spot benchmark, also edged down US cent 0.95 to end the second fortnight of January at US cents 92.40 per pound.

In China, cotton spot market found support from the futures market that corrected at high-end price levels and sellers were keen to offload. Offers for hand-picked Xinjiang-origin grade-3128 cotton in Hebei were at 15.65 Yuan per kg (US$2.47 a kg). Meanwhile, the China Cotton Index inched up 51 Yuan on the fortnight to 15,709 Yuan per metric ton.

In Pakistan, cotton markets ended the last two weeks on dull trading on the Karachi Cotton Exchange, while spot rates fell PakRs100 to PakRs.7,645 per maund (37.32 kg each). Buyers remained on the sidelines after the government cuts sales tax and customs duty on cotton imports, which led to drop in cotton and yarn prices in the local markets. Export orders for finished goods prompted spinners and mills to conclude deals as they needed good fibre to cater to the quality requirement of end products.

In India, firm trend emerged in cotton markets in the last week of January and prices ruled upwards after state-run Cotton Corporation of India and multinationals buyers stepped up purchases across key growing regions. During the fortnight benchmark Shankar-6 was traded up INR200 at INR41,800 per candy. With more than half the estimated crop size of 345 lakh bales (or 34.5 million bales of 170 kgs each) already arrived in the market, CCI has so far bought 6.2 lakh bales, of which 3.4 lakh bales were purchased under the minimum support price of INR4,270 per quintal (100 kgs). Remaining was been purchased under commercial operations. The market prices were ruling above the MSP level and considering the viability, it is sold to textile mills.

Cotton yarn markets in China were stable to slightly weak amid thin transaction. Conventional varieties like 21s, 32s and 40s reported better sales, and some medium to high counts and good quality saw firm prices. 21s were at US$3.2.98 per kg and 40s at US$3.77 per kg) in Shengze, both up US cents 7 on strong Yuan. In India, cotton yarn prices have continued surging on the export market while domestic prices rolled over. In India, 30s combed cotton yarn for knitting remained unchanged at INR198 a kg (US$3.12 per kg) in Ludhiana while export offers jumped by US cents 15 to US$3.35 per kg.