Cotton Futures Come Under Pressure

Market Intelligence

Cotton Futures Come Under Pressure

Cotton futures were under pressure in the last fortnight of March in the absence of any fundamental news while rumours made rounds with respect to lost markets due to the imposition of US tariffs as the month was closing. The new crop December contract took a hit in the last week, but settled above the trend line, thus keeping the uptrend momentum. US cotton futures ended the fortnight down US cents 2.69 for May contract at US cents 81.83 per pound on the ICE while the new crop December contract edged down US cent 1.06 to US cents 77.66 per pound.

Cotlook A index, the global spot benchmark lost US cents 2.85 on the fortnight at US cents 91.55 per pound, but after moderating on third week.

In China, reserve auction was active but could not find much demand as compared to previous seasons. Nevertheless, the first two weeks indicated an average sale of about 100,000 bales. Chinese were complaining that goods offered at auction were of poor quality and had petitioned the government to allow more import. The auction includes only 2011-2013 crop cotton, mostly of poor quality. The China Cotton Index edged down 65 Yuan to 15,657 per metric ton (US cents 112 a pound).

In India, cotton prices declined across varieties by INR200-2,600 per candy in the last two weeks of March. Benchmark, Shankar-6 was traded at INR40,600 per candy, down INR600 on the fortnight week while V797 was INR1,800 cheaper at INR26,400 per candy. Reportedly, cotton planting is forecast to fall 12% in 2018-19 crop year as pink bollworm infestation slashed farmers’ incomes and prompted them to shift to other crops.

Cotton yarn markets in China were under upward correction, although participants were cautious overall. Offers for some best-sell products picked up slightly, mainly for high-quality and high-count yarns, while the prices of conventional products remained unchanged. Yarn prices increased with 32s at 23.10 Yuan per kg (US$3.65 per kg, up US cents 3) and 40s gained at 24.10 Yuan per kg (US$3.81 per kg, up US cents 4) in Shengze. In India, cotton yarn prices moderated in line with the fall in cotton prices in recent weeks. 30s combed cotton yarn for knitting fell to INR195 per kg (US$2.99 per kg, down US cents 8) in Ludhiana while export offers were down US cents 10 at US$3.25 per kg.