ICE cotton hits 3-week low amid crude oil weakness, market sell-off

Yesterday, the ICE December cotton contract settled at 72.27 cents per pound (0.453 kg), down by 1.26 cents. It reached as low as 71.11 cents, the lowest level since September 19.

Crude oil tanked by more than 4 per cent due to the possibility of a ceasefire between Hezbollah and Israel. However, concerns about potential attacks on Iranian oil infrastructure still lingered. The sharp decline in crude oil prices led to a drop in cotton, which is a natural alternative to polyester fibre.

On October 8, trading volume reached 55,494 contracts, marking the highest activity in two and a half weeks, with 38,060 contracts cleared the previous day. Total open interest in cotton futures rose by 2,603 contracts on October 8, reaching 243,334 contracts—the highest since April 9 (244,710 contracts). Open interest has increased in six of the last seven sessions, with a net rise of 13,079 contracts. ICE’s deliverable cotton futures contract stocks remained unchanged at 265 bales as of October 7.

Market experts noted that a weak opening in the Chinese commodity market, coupled with falling stock markets, also weighed on cotton futures. Cotton demand was mixed, primarily limited to subsistence needs, though it was better than other times of the year. The market saw long-covering and proprietary selling early in the day, which added to the pressure.

The US Department of Agriculture (USDA) reported that, as of the week ending October 6, the quality of US cotton was rated at 29 per cent, down from 31 per cent the previous week and 32 per cent in the same period last year. The US cotton harvest was 26 per cent complete, compared to 20 per cent the prior week, 23 per cent a year ago, and a five-year average of 22 per cent.

Hurricane Milton, expected to make landfall on Florida's Gulf Coast as a Category-3 storm, currently poses no threat to the cotton crop unless its path changes significantly. Clean-up efforts from Hurricane Helene, which affected areas from Florida to North Carolina, are ongoing, with significant disruptions in the southern US. Discussions regarding cotton crop losses from Helene, estimated at 300,000 to 500,000 bales, are still underway.

At present, ICE cotton for December 2024 was trading at 72.67 cents per pound, up by 0.40 cents. Cash cotton settled at 66.27 cents (down 1.26 cents), the October contract at 72.03 cents (down 1.26 cents), the March 2025 contract at 74.83 cents per pound (up 0.41 cents), the May 2025 contract at 76.15 cents (up 0.40 cents), and the July 2025 contract at 76.91 cents (up 0.38 cents). A few contracts remained unchanged from the previous closing, with no trading activity noted for the day.

Fibre2Fashion News Desk (KUL)