ICE Cotton The market has managed to break above short‐term important resistance levels and settled above 70.00 (basis the Dec17 contract) for the first time since mid‐June when the market broke heavily to the down‐side. Yesterday’s session triggered better but not outstanding volume. Unsurprisingly, the bullish outright action forced the Dec17‐Mar18 spread to trade firmer which continues to reflect the near‐term tight fundamental picture. Overall, the technical picture still suggests that the move from the June, respectively mid‐July, lows is of corrective nature. It may take a convincing break and follow‐up action above (about) 72.00‐72.50 to cancel this view. Support is at 68.00‐67.80 and 67.20‐67.00. Settling below 67.00 calls for a move to below this month’s low (66.28).
USA ‐ The biggest fundamental nugget for the U.S. is the weather in West Texas which has been beneficial for crop development over the last several days with more rain chances slated for the balance of the week. Rainfall for the month of July was 5.84 inches in Lubbock which was 3.93 inches above the long‐term norm. The recent rainfall has boosted US crop conditions although as a consequence cooler than normal temperatures are creating some concern, especially on the later maturing crops. The beginning of August won\’t feel terribly summerlike for portions of the central and eastern U.S. Hence the next few weeks will be very influential on yield and abandonment. Rounds of showers are also forecast for the Southeast later this week also bringing extremely low humidity which will aid in moisture retention. Since cotton is blooming from West Texas and eastward, all of those regions are in peak water demand. Traders are keen for next week’s USDA Supply and Demand report which may give some market direction due to improving crop projections. This week’s crop conditions numbers indicate one that is still in relatively good shape and for the U.S. as a whole maturing more quickly than in weeks past.
India – Cotton planting in India reached to 11.156 million ha as of July 27 compared to same period of last year (9.233 million ha), according to Ministry of Agriculture. As per Indian Meteorological Department, monsoon rainfall was slightly above normal in July after being 4% in excess in June. Total rainfall received in July was 290.4 mm, which is 0.41% above normal. Rainfall received since June 1 over the country has been 2% above normal, with only northwest & central receiving above normal rainfall and unevenly distributed, with floods in Gujarat and South Rajasthan and very heavy showers in MP. Parts of southern India, particularly Karnataka, have received scanty rains. During the week, Indian rupee against USD surged to a two‐year high of 63.60 levels due to strong foreign inflows into the domestic capital markets and Reserve Bank of India cuts key lending rates by 25 basis points to 6 percent, as expected by the market. Cotton 29 mm MCX (October contract) gained during the week and likely to trade slightly firm in the coming days. Strong resistance seen at 18’800‐18’850 levels and support is at 18’150‐18’200.
China – There is still no official confirmation about the extension of reserve sales into September. This is causing some concern and pushed the market slightly higher. With higher ICE, import demand decreased. This week reserve sales dropped further with daily average around 50 %. Mills start to complain about poor demand for yarn and fabrics. The cotton crop is developing well all over the country and production estimate remains about 10% over last year.