Global economic & political turmoil drive ICE cotton to 4-year low

06 Aug '24

2 min read

Global economic & political turmoil drive ICE cotton to 4-year low

Pic: Adobe Stock

Insights

ICE cotton prices have dropped to a near four-year low due to economic uncertainty and geopolitical tensions, particularly in the US and Bangladesh.
A possible US recession and political instability in Bangladesh, a key cotton consumer, have weakened demand.
The decline in the dollar index and crude oil prices has also pressured cotton markets.

ICE cotton has seen a steep fall, touching a near four-year low due to a pessimistic climate on economic and geopolitical fronts. A possible recession in the US has caused a decline in crude oil prices. Significant political volatility in Bangladesh, a major cotton-consuming market, has also put pressure on US cotton. Cotton prices have declined due to weak demand, and a declining dollar index has failed to support cotton prices. However, there was a slight recovery at the end of the trading session.

Yesterday, the ICE cotton December contract settled at 67.78 cents per pound (0.453 kg), down 0.47 cent. Earlier, it breached a major support level of 67.5 cents and fell below 67 cents, marking a four-year low.

Yesterday, global equity markets also saw a steep decline. Crude oil was down, leading to heavy selling of cotton. The dollar index significantly dropped to trade near the 102 level, which was a major support point. This drop could provide good opportunities for foreign buyers to purchase cotton at lower levels. Crude oil futures also fell due to the decline in equities, but the fall in crude oil was limited by concerns about a wider war in the Middle East.

Yesterday, the trading volume was 38,580 contracts, slightly up from the average, with 22,869 contracts cleared on Friday. Open interest stands at 229,737, a decrease of 538. According to ICE data, the inventory of ICE's deliverable No. 2 cotton futures contract was 18,991 bales. Certified stocks started the day at 18,991 bales, down 352 bales due to decertifications on August 2.

The recent upheaval in Bangladesh may impact global cotton demand and supply dynamics, as it is one of the most important cotton-consuming markets in the world. Traders are closely monitoring developments.

On Tuesday, ICE cotton for December 2024 was traded at 67.54 cents per pound, down 0.24 cent. Cash cotton settled at 62.05 cents (down 0.63 cent), the October contract at 66.64 cents (up 0.09 cent), the March 2025 contract at 69.16 cents per pound (down 0.26 cent), the May 2025 contract at 70.42 cents (down 0.25 cent), and the July 2025 contract at 71.57 cents (down 0.07 cent). A few contracts remained at the level of the last closing, with no trading noted today.

Fibre2Fashion News Desk (KUL)

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