ICE cotton witnesses heavy losses due to better weather, huge sell-off

31 May '24

2 min read

ICE cotton witnesses heavy losses due to better weather, huge sell-off

Pic: Adobe Stock

Insights

ICE cotton's early gains were offset by heavy volatility, a weaker US dollar, improved weather conditions, and a sell-off in commodities and equities, resulting in over 4 per cent losses.
The July contract fell 334 points to 77.76 cents per pound.
Despite a weak dollar, speculative selling prevailed.
Certified stocks saw a significant one-day drop.

ICE cotton has pared its early gains amid heavy volatility. Although a weaker US dollar was a positive sign for cotton, improved weather conditions and a sell-off in other commodities and equity markets led to extraordinary selling, causing losses of over 4 per cent in US cotton.

According to trade analysts, the US cotton July contract settled 334 points lower at 77.76 cents per pound (0.453 kg). The December contract settled at 76.51 cents, down 159 points on Thursday.

Although the US dollar index was weak, which is generally considered positive for cotton prices, ICE cotton ignored the currency markets and faced heavy selling, considered purely speculative moves. Crude oil was slightly weak on inventory data, bearish demand, and economic outlook, putting extra pressure on cotton prices.

On Thursday, certified stocks dropped by 59,978 bales to 133,448 bales, driven by 666 new certifications and 60,909 decertifications. This is the largest single-day decertification since July 5, 2018. Typically, such a reduction would boost front-month prices, but it didn't happen, showing how market fundamentals are losing influence.

The US cotton belt is enjoying one of the most favourable weather conditions, with only 5 per cent of the area under drought conditions. Some areas are overly wet, but this may not cause any harm at present. Cotton traders are waiting for the US export sales report, which is due today. If any improvement in demand shows, the market will take support and move forward; otherwise, it may remain under pressure.

On Friday, ICE cotton July 2024 traded 0.65 cents lower at 77.11 cents per pound. Cash cotton traded at 74.01 cents (down 3.34 cents), October (new crop) contract at 77.05 cents (down 0.96 cents), December 2024 contract at 75.97 cents (down 0.54 cents), March 2025 at 77.61 cents per pound (down 0.68 cents), and May 2025 at 78.97 cents (down 0.82 cents).

Fibre2Fashion News Desk (KUL)

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