ICE cotton down as strong dollar, good crop conditions weigh on market

11 Jun '24

2 min read

ICE cotton down as strong dollar, good crop conditions weigh on market

Pic: Adobe Stock

Insights

ICE cotton faced losses due to a stronger dollar and favourable crop conditions, hitting new yearly lows.
Despite a crude oil rally, the cotton market remained weak.
The July contract fell to 71.81 cents per pound, and all future contracts settled with losses.
The USDA reported 80 per cent of US cotton planted and 56 per cent in good or excellent condition.

ICE cotton experienced heavy losses on the first day of this week. The downward trend continued, and US cotton further declined due to a stronger dollar index and favourable weather conditions. The market touched new yearly lows amid weak sentiments. Even stronger crude oil prices could not support the cotton market to avoid a heavy sell-off.

According to trade analysts, the US cotton July contract settled 203 points lower at 71.81 cents per pound (0.453 kg). The December contract settled down 130 points at 71.59 cents on Monday. All cotton future contracts settled with losses, breaking major support levels in the technical chart.

The dollar index was stronger yesterday, settling above a level of 105. A higher dollar index encouraged buying in cotton futures. A stronger dollar makes US cotton purchases more expensive. Crude oil rallied on Monday, which should support cotton as expensive crude oil increases prices in the polyester value chain. However, it was unable to support cotton yesterday. Although, it can be said that stronger crude oil limited the decline in US cotton futures.

Certified stocks began the day at 132,467 bales, up 1,430 bales due to new certifications. There were 4,128 bales awaiting review. The net increase in certified stocks last week was 6,792 bales.

The USDA US Crop Progress report was released after the close, showing 80 per cent of US cotton planted by June 9, matching the 5-year average. Cotton squaring was at 14 per cent, above the 5-year average of 12 per cent. The condition report indicated 56 per cent of crops in good or excellent condition, down from 61 per cent last week but better than 49 per cent a year ago.

Traders are waiting for the US export sales report and the WASDE report for further information about the demand and supply scenario. Currently, no significant changes are expected in the cotton markets, which may remain under pressure until there is any improvement in demand.

On Tuesday, ICE cotton July 2024 was traded 0.15 cents higher at 71.96 cents per pound. Cash cotton was 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).

Fibre2Fashion News Desk (KUL)

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