ICE cotton futures fell over 1% recently, hurt by a slightly bearish supply-demand report from the US government, and profit-taking after prices of the natural fibre touched a near four-year high earlier in the day. The most active ICE cotton contract for March expiry settled down 0.97 cent, or 1.17%, at 81.68 cents per lb.
Cotton futures earlier touched a session high of 84.65 cents, a peak since March 2014. Prices were up 4.7% for the week, the best weekly performance since the week ended September 1, 2017 “Before the report, the market got ahead of itself. We had a lot of speculative buying and short-covering,” said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia.
“But then there was a sell-off and after the report there was further sell-off. We saw profit-taking by speculators and producers selling.” The US Department of Agriculture (USDA) in its monthly World Agricultural Supply and Demand Estimates (WASDE) report released recently raised its global production estimates for 2017/18 crop by about 1 million bales.
“Projected world ending stocks are changed slightly this month, down 200,000 bales from December, but at 87.8 million bales are still forecast marginally higher than the year before,” the report said. The USDA, however, lowered its 2017/18 US production and ending stocks estimates slightly from its outlook last month.
“The WASDE report was somewhat bearish in that both domestic and world aggregate ending stocks were projected at a higher- than-expected level,” said Louis Rose, director of research and analytics at Memphis, Tennessee-based Rose Commodity. “Overall, ICE futures are likely to continue to move higher on money flow and macroeconomic factors and support from the mill on-call aggregate position until significant certified stocks show up against ICE futures.”
Effective from second week of January 2018, the daily trading limit for all cotton No. 2 futures contract delivery months will be revised to 4 cents per pound above and below the prior-day settlement price, the Intercontinental Exchange said. Meanwhile, Indian cotton traders have cancelled contracts to export some 400,000 bales of the fibre after a rally in domestic prices and the rising rupee made overseas sales unattractive, the president of the Cotton Association of India told Reuters.
The switch has left cotton buyers in leading markets like Bangladesh, Vietnam and China seeking to make up shortfalls by tapping suppliers in the United States, Australia and Brazil, said association head Atul Ganatra. Total futures market volume rose by 8,546 to 71,984 lots. Data showed total open interest gained 7,371 to 295,476 contracts in the last session.