ICE cotton surge amid global economic stimulus & weather fears

Yesterday, the ICE cotton December contract settled at 74.09 cents per pound (0.453 kg), up by 0.65 cents. The contract reached its highest level in the last three months.

The dollar index was slightly lower, down by 0.4 per cent. Positive broader markets put pressure on the dollar index. Crude oil surged by more than 2 per cent as China’s monetary stimulus and fears of supply disruptions provided support. Rising conflicts in the Middle East could potentially affect regional oil supplies. The rise in crude oil prices and the weaker dollar index were positive external factors for US cotton.

Yesterday’s trading volume was strong, with 52,710 contracts traded on the day, compared to 41,590 contracts cleared the previous day. Open interest at the start of the day was 229,326 contracts, reflecting a decline of 2,760 contracts from the previous day. Over the past five sessions, open interest dropped by 7,363 contracts, reaching its lowest level since September.

Weather concerns also played a significant role in supporting cotton prices. Tropical Storm Helene, forming in the northwestern Caribbean, was expected to intensify into a hurricane by Wednesday, raising fears of potential damage to cotton crops in the Southeastern US. The storm could reduce the availability of high-quality cotton, with any damage to crops potentially leading to discoloured or lower-quality cotton, which may negatively impact future pricing trends.

China’s economic stimulus measures provided significant support to cotton prices. The People's Bank of China announced its largest stimulus since the COVID-19 outbreak, targeting interest rates, the real estate sector, and the stock market. These actions were expected to boost economic activity and, consequently, cotton demand.

Traders are currently focusing on weather conditions and speculators' positions to gauge market movements.

At present, ICE cotton for December 2024 is trading at 73.88 cents per pound, down by 0.21 cents. Cash cotton traded at 67.59 cents (up by 0.65 cents), the October contract at 73.10 cents (up by 1.40 cents), the March 2025 contract at 75.58 cents per pound (down by 0.27 cents), the May 2025 contract at 76.64 cents (down by 0.29 cents), and the July 2025 contract at 77.33 cents (down by 0.06 cents). A few contracts remained at the level of the last closing, with no trading noted today.

Fibre2Fashion News Desk (KUL)