COTCO Company would like to update Sales – Export of US cotton this week with the following market news:
- MARKET OVERVIEW
The easing of macroeconomic worries helped cotton prices close to the ceiling on Wednesday. However, Thursday’s USDA export sales report revealed a significant net drop, leaving the market slightly lower at the end of the week.
Cotton futures in March: closed at 83.20 c/lb, down 165 points.
Total open interest increased by 2.829 to 194.776 contracts at the end of the week.
The market has had a mixed week of trading but is generally more relaxed than what has been going on recently.
– First, market sentiment improves upon the realization that Covid restrictions will be eased in China. China is set to announce the easing of COVID-19 quarantine protocols in the coming days.
– Additional dovish comments from the Fed chairman on Wednesday “maybe the Fed will reduce the rate from next month“, which helps push stocks and commodities higher
– US Dollar is lower as a (non-daily) trend factor, closing at the lowest level since August.
– The US Personal Consumer Expenditure (PCE) Core Deflation for October, a measure of inflation, came in below expectations at 0.2% month-on-month and 6.0% year-on-year. before.
– Consumer spending in the US rose to 0.8% in October, up from the 0.6% reported in September.
– The number of applications for unemployment benefits in the US still proves that the labour market is continuing to be strong, down from 16,000 applications to 225,000 applications.
– Oil prices rose about 1 USD/barrel, supported by the possibility of OPEC+ cutting supply further and China reopening.
– A railroad strike in U.S. also helped boost the market.
– The historic dry Mississippi River will continue to impede export shipments.
- SALES – EXPORT USDA REPORT
For the week ending 24th November, sales for crop 2022/23 came in at a meagre 16.500 bales of Upland and 11.000 bales for crop 2023/24 (but at least positive), export shipments reached about 139,500 bales and were further slowed by the drying up of the Mississippi River.
Pima sales for crop 2022/23 totalled 1.800 bales, and 1.300 bales were shipped.
- MARKET COMMENTS
Market will focus on US cotton production and the numbers reflecting consumer demand of mills, which will be forecasted next week on Friday, 09th December, in the WASDE Supply-Demand report.
The lack of demand is an issue at the moment. However, as traders also noticed growers’ refusal to sell at low prices, the firm base price of US cotton reflects this.
For the two recent major consumer markets for US cotton, India and Pakistan, their crops may be worse than traders initially thought.
The weakening trend of inflation in U.S. reinforces the possibility that Fed will slow rate hikes as early as December, maybe even cutting rates at some point in 2023. There is a bet on the case 91% chance the Fed will raise interest rates by 0.5 percentage points, instead of by 0.75 percentage points, at its meeting on 14th December. As a result, traders are removing some technical resistance here, with crude oil prices increasing forecasts for a near rally in cotton.
The trend forecast on the chart is below the market at 77.64 – 78.02 and above the market at 87.50 – 87.75, 113.73 – 113.81.
Wishing you a wonderful weekend!