Mumbai, 29 Jul (Commoditiescontrol): Cotton futures struggled to maintain recent gains, slipping below the critical 70-cent mark as crop progress data weighed on trader sentiment. ICE cotton futures fell over 1% on Friday, driven by declining oil prices and overall weakness in U.S. agricultural markets. The December cotton contract decreased by 91 points, closing at 67.99 cents per pound. March and May contracts also saw declines, settling at 69.76 and 71.13 cents per pound, respectively. The December contract recorded its third straight weekly loss, down 3.8% for the week.
Analysts attributed the pressure on cotton prices to a broader risk-off sentiment spreading from U.S. agricultural markets. The cotton market has been dominated by bearish trends, with prices hitting their lowest since October 2020. Factors such as anticipated larger yields, reduced global demand, and speculator selling contributed to driving prices below the critical support level of 70 cents.
Adding to these challenges, crude oil's decline by $1.12 to $77.16 per barrel further pressured cotton prices. The latest federal export sales data also weighed on the market. The Export Sales report showed net reductions of 74,207 running bales (RB) for old crop cotton as of July 18, primarily due to cancellations by Vietnam. However, new crop export bookings reached 285,874 RB, marking a high for forward sales, with shipments increasing to 131,310 RB as the marketing year nears its end.
Despite the current market difficulties, cotton export commitments of shipped and unshipped sales are at 119% of the USDA forecast, 2% ahead of the normal pace. Shipments are at 93% of the projection, slightly below the 96% average. Forward bookings stand at 2.72 million RB, 9.7% higher than last year, but still on the lower end of recent years.
ICE cotton stocks remained unchanged on July 24 at 38,026 bales of certified stocks. The Cotlook A Index fell by 70 points to 79.05 cents/lb, and the USDA Average World Price (AWP) was reduced by 140 points to 55.02 cents/lb, effective through next Thursday.
Looking ahead, the cotton market's outlook remains closely tied to weather conditions in key growing regions, particularly with expected wetter weather in the Southeast. The USDA's weekly crop progress report indicated improved crop conditions, with 81% of the U.S. cotton crop squaring and 42% setting bolls, both ahead of average paces. Additionally, 53% of the crop was rated good/excellent, an 8% increase from previous reports.
New crop planted acreage rose to 10.67 million acres, with harvested acreage increasing to 9.67 million acres, boosting production by 1 million bales to 17 million. Projected end-of-year stocks for the 2024/25 crop year increased by 1.2 million bales to 5.3 million. Globally, old crop carryout dropped by 1.66 million bales to 79.31 million, while new crop production increased by 1.05 million bales, leading to a total stock reduction of 860,000 bales to 82.63 million.
In a related development, Ivory Coast's cotton output for the 2024-2025 season is projected to rise by 6% to 367,000 metric tons from 347,922 tons the previous year, according to Agriculture Minister Kobenan Kouassi Adjoumani.
The Commitment of Traders report indicated that managed money spec funds in cotton futures and options added 4,357 contracts to their net short as of July 23, bringing the total to 44,583 contracts. Analysts are closely monitoring technical support levels at 67.41/66.82 and resistance levels at 68.79/69.58 for December contracts.
The cotton market continues to face significant challenges from various economic and geopolitical factors, leading to bearish trends. However, improved crop conditions and increased acreage offer a glimmer of hope for recovery in the coming months.
(By Commoditiescontrol Bureau: 09820130172)
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