ICE cotton sees fifth day of gains; traders eye USDA export report

22 Aug '24

3 min read

ICE cotton sees fifth day of gains; traders eye USDA export report

Pic: Adobe Stock

Insights

ICE cotton maintained strong momentum for the 5th consecutive session, with the December contract settling at 70.35 cents per pound, gaining 330 points over the last five sessions.
A weaker US Dollar Index, poor crop conditions, and lower price levels encouraged buying.
Weather concerns in key US cotton regions, particularly Texas, are raising yield worries.

ICE cotton maintained strong momentum for the fifth consecutive session yesterday, achieving notable gains. The weakening Dollar Index further supported the US cotton market. A weaker Dollar Index and poor crop conditions prompted buyers to take risks in ICE cotton contracts. The current lower price levels also encouraged buyers to engage in fresh deals. Traders are now waiting for the export sales data due today.

Yesterday, the ICE cotton December contract settled at 70.35 cents per pound (0.453 kg), up 1.01 cents. The contract gained 330 points over the last five sessions.

The US Dollar Index continued to decrease, reaching a seven-month low of 101.30. The weakness in the Dollar Index made cotton purchases more attractive for foreign buyers, increasing the likelihood of strong demand in the coming days.

Yesterday, the Federal Reserve's July meeting minutes revealed strong support among policymakers for cutting interest rates in September, with a 38 per cent chance of a 50-basis point rate cut and a 62 per cent chance of a 25-basis point cut.

The total trading volume was robust, with 31,561 contracts traded. This compares to 29,751 contracts cleared the previous day, reflecting strong market activity. Open interest decreased, possibly due to the expiration and exercise of positions from September options, starting the day at 231,389 contracts, a decrease of 891 contracts. Specifically, open interest for the December contract began at 150,534 contracts, down by 1,251 contracts, indicating a possible shift in market positioning. Certified stocks remained unchanged at 12,767 bales, showing stability in inventory levels despite the market's activity.

Weather conditions in the US cotton production area are becoming slightly adverse. Texas, a key cotton-producing region, has deteriorated further with intensifying extreme heat, raising concerns about the potential impact on cotton yields.

Traders observed a slight improvement in cotton demand, but it remained relatively weak overall. They are now focusing on the USDA's upcoming weekly export sales report, scheduled for release today, which will provide further insights into demand and influence market direction.

Currently, ICE cotton for December 2024 is trading at 70.33 cents per pound, down 0.02 cents. Cash cotton traded at 65.21 cents (up 0.91 cents), the October contract at 69.71 cents (up 0.91 cents), the March 2025 contract at 71.62 cents per pound (unchanged), the May 2025 contract at 72.63 cents (down 0.04 cents), and the July 2025 contract at 73.45 cents (up 0.23 cents). A few contracts remained at the level of the last closing, with no trading noted today.

Fibre2Fashion News Desk (KUL)

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