COTCO Company would like to update Sales – Export of US cotton this week with the following market news:
- MARKET OVERVIEW
The ICE cotton contract extends its 3-day limit gain to hit a two-week high. Cotton December Futures closed the weekend at 86.93 c/lb.
Due to the upbeat demand for strong US sales data despite pressure from a strong dollar, rumors that China may exit the zero-Covid policy, as well as the closing time for ICE December just over 2 weeks left. The combination of these different factors together helped boost the price for the first time in weeks.
Total open interest rose to 251,742 contracts, up 4,369 contracts for the week, hitting a high not seen since February.
- USDA SALES-EXPORT REPORT
USDA’s Export Sales Report strongly increased for the week ending October 27. Sales for season 22/23 reached 191,800 bales of Upland and 1,200 bales of Pima. China returned as the largest buyer with 122,000 bales (accounting for two-thirds), followed by Pakistan with 23,200 bales and Turkey with 15,800 bales.
Export was slower than usual reaching 119,000 bales of Upland and 100 bales of Pima. The performance of China’s strong purchases is related to the quota.
- ECONOMY
Any thought of the Fed slowing down rate hikes was halted on Wednesday as 3/4 of the point hike came into play. Fed’s still hawkish stance is not surprising considering the better-than-expected economic news that has been released in the previous few weeks.
US jobless claims fell below forecasts to 217,000, indicating a strong labor market and making Fed more likely to raise interest rates.
After the new dollar rate was announced, the external markets fell sharply and continued to trend lower, creating a volatile trading week. Interestingly, the strong dollar did not affect cotton prices, which were stronger at the end of the week.
- MARKET COMMENTARY
Speculators can often push the market between forwards, with the upcoming December’s FND acting as a reality check where cash and futures prices converge. Technically, there were a lot of volumes traded in the last two sessions, the move was motivated by the break of a two-month downtrend line.
The strong growth of cotton prices has not been immediately commensurate with the demand for yarn. Although yarn trade has warmed up, mills still complain about large inventories.
Traders will focus on the release of the November WASDE Supply-Demand Report on Wednesday, 09th November. The market will also continue to monitor macroeconomic factors, as they have been a major determinant of recent price action.
Fed rate hike will further weaken the economy. With central banks raising interest rates across the globe, that doesn’t bode well for discretionary spending. Therefore, expect the market to move into an up and sideways range once the selling pressure from the speculators is gone, as they will not be shorting the market immediately after this decline.
The short-term gap below the market on the forecast chart is at 77.64 – 78.02 and above the market at 102.73 – 102.81.
Posted on 7/11/2022
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