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Weekly: Cotton Futures Weaken as USDA Projections Weigh on Market Sentiment

13 Jan 2025 9:36 am
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MUMBAI, 13 Jan (Commoditiescontrol): ICE cotton futures ended the week on a weaker note, weighed down by a strengthening U.S. dollar and bearish supply projections from the USDA’s January World Agricultural Supply and Demand Estimates (WASDE) report. The report highlighted increased production and higher ending stocks, pressuring market sentiment and influencing Friday's session significantly.

The March cotton contract fell by 1.42 cents to settle at 67.01 cents per pound, with May and July contracts also slipping to 68.26 cents and 69.37 cents per pound, respectively. The March cotton contract recorded a weekly loss of 2.66 cents or 3.82%, settling at 67.01 cents per pound. All active contracts remained below the 70-cent psychological threshold, underscoring the market’s bearish tone.

The USDA's latest WASDE report painted a challenging picture for the cotton market. U.S. cotton production for the 2024/25 crop year was revised upward by 159,000 bales, bringing the total to nearly 14.4 million bales. Ending stocks increased by 400,000 bales to 4.8 million, reflecting reduced demand prospects. On a global scale, production estimates rose by 2 million bales to 119.45 million, driven by a notable increase in China's output. Global ending stocks were also revised higher, climbing 1.9 million bales to 77.91 million.

Export trends showed mixed signals. The USDA cut U.S. export projections by 300,000 bales to 11.0 million, citing heightened global competition. Meanwhile, global export estimates rose by 225,000 bales, fueled by stronger exports from Brazil, Australia, and India, which offset the decline in U.S. shipments.

Despite the bearish outlook, the USDA's weekly export sales report offered a glimmer of hope. Upland cotton sales reached a marketing-year high of 191,700 running bales (RB), a 66% increase from the previous week and 47% above the four-week average. Vietnam and China emerged as the top buyers, purchasing 45,400 RB and 43,800 RB, respectively.

Additional data reflected subdued market activity. On January 9, The Seam reported 9,935 bales sold online at an average price of 64.75 cents per pound. Certified stocks on ICE remained unchanged at 20,113 bales, while the Cotlook A Index dipped by 25 points to 78.70 cents per pound. The USDA Adjusted World Price (AWP) fell by 37 points from the previous week to 54.66 cents per pound.

From a technical perspective, the March cotton contract remained below key moving averages, signaling ongoing market weakness. Analysts identified support levels at 66.37 and 65.74 cents, while resistance levels stood at 68.17 and 69.34 cents. Speculative selling was amplified by broader financial market volatility, with the U.S. dollar index rising by 481 points and treasury yields spiking. Crude oil’s $2.69 per barrel gain provided mixed signals, but it failed to offset the bearish impact of the USDA data.

The cotton market remains under pressure from rising global supplies, weak export demand, and broader economic uncertainties. However, the marketing-year high in export sales offers a silver lining, indicating potential demand from key importers such as Vietnam and China.

Looking ahead, the market is expected to remain volatile as traders monitor global production trends, export competition, and macroeconomic signals. While the bearish supply outlook dominates near-term sentiment, some analysts suggest bargain-hunting opportunities may emerge as the market stabilizes post-holiday season.

(By Commoditiescontrol Bureau; +91 98201 30172)


       
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