Cotton Market Weakness Continues
Cotton futures prices settled lower three consecutive sessions this week at the Intercontinental Exchange (ICE) in New York. Weakness in equity markets and uncertainty about China’s cotton reserve policy were blamed by several analysts for the market’s indecision.
The marketing week began with cotton futures posting moderate gains as equity markets in Europe, Asia and the United States were firmer on the day as talk of more government stimulus in the European Union, Japan and China circulated among traders. March cotton began the ICE session by moving slightly lower before buying returned. The contract reached a high of 62.75 cents per pound and settled 36 points higher at 62.45 cents. May cotton settled at 62.83 cents, up 37 points, and December settled 39 points higher at 62.75 cents.
Cotton futures were on the defensive Monday as the March contract traded sideways early, but selling pressure intensified and moved it to negative ground. March settled at 61.60 cents, down 85 points. It was the largest single-day loss for the contract since Dec. 10. May cotton settled 73 points lower at 62.10, and December settled at 61.97 cents, down 78 points. Weaker oil prices and equity markets were noted by traders.
March cotton dipped below a key support level of 61.15 cents per pound which sparked a wave of selling Tuesday; however, one analyst thought it was “absorbed relatively well.” March traded to a low of 60.96 cents, its lowest level since Oct. 9, before light buying emerged and enabled it to settle at 61.41 cents, down 19 points. Other nearby contracts settled with single-digit losses.
Tuesday’s technical break and the beginning of the index roll period weighed on the cotton market Wednesday. March cotton moved lower throughout the ICE session and reached a low of 60.70 cents per pound as spec funds rolled out of March and into May. The spot month settled at 60.86 cents, down 55 points. May cotton settled 56 points lower, and December was 38 points lower. After the close of trading, one market newsletter noted March had settled lower in 10 of the previous 18 sessions.
The losing streak ended Thursday as declining certificated stocks and higher oil prices provided a boost to the cotton market. Buying helped lift March cotton to a high of 61.52 cents late in the session. The contract settled 50 points higher at 61.36 cents. May cotton settled at 61.91 cents, up 46 points, and December settled 38 points higher at 61.88 cents.
In other news, USDA reported net sales of U.S. upland cotton in the week ended Jan. 21 totaled 128,300 bales, down 34 percent from the previous week and 8 percent from the four-week average. The week’s top three buyers were Turkey, Vietnam and Indonesia. The department also reported net sales of 68,700 bales for delivery in the 2016-17 marketing year. Export shipments totaled 157,100 bales, up 16 percent from the previous week and 17 percent from the four-week average. Turkey, Vietnam and Mexico were the primary destinations.
In the spot cotton market, producers sold 39,087 bales online in the week ended Jan. 28, down from 63,003 bales the previous week. Average prices received this week ranged from 54 to 57 cents per pound.