Cotton Market Weekly (16/10/2015)

Last week’s slightly bullish monthly supply and demand reports from the U.S. Department of Agriculture apparently set the stage for a rally in the cotton market as the December futures contract gained 172 points in the week ended Oct. 15. Although USDA lowered its estimate of world cotton consumption by 1.17 million bales for the 2015-16 marketing year, it lowered world production by 1.36 million bales as crop estimates were reduced for China, Pakistan, Brazil, Australia and the United States.

Monday

Cotton futures at the Intercontinental Exchange (ICE) traded in a narrow range during Monday’s session. December, the most active contract, opened higher then traded on either side of unchanged before settling 8 points higher at 61.69 cents per pound. March cotton settled at 61.67 cents, up 14 points, but forward months settled modestly lower.

Tuesday

Early trading Tuesday at ICE was uneventful before December cotton broke through nearby technical resistance and traded as high as 64.16 cents per pound as volume surged at the exchange. The contract settled in the top half of a 263-point range at 63.86 cents, up 217 points, and March settled 203 points higher at 63.70 cents. It was the largest rally since August, and traders and analysts were at a loss to explain it. One analyst suspected it may have been “a combination of new longs and short covering” along with continuing concerns about the size and quality of the U.S. crop based on early classing data.

Wednesday

The market cooled Wednesday as light selling pressure emerged. December cotton initially moved lower during the session, then traded on either side of unchanged but was on positive ground until the final 30 minutes of trading. The contract settled at 63.76 cents, down 10 points. March cotton settled 6 points lower at 63.64 cents per pound.

Thursday

December slowly retreated further in early trading Thursday then moved sideways for the remainder of the session. The contract traded as low as 63.15 cents and as high as 63.76 before settling at 63.44 cents, down 32 points. All other contracts posted similar losses.

The latest weekly U.S. export sales and shipment report, released Friday morning due to the Columbus Day holiday on Monday, contained disappointing data. USDA reported net upland sales of U.S. cotton totaled only 67,300 bales in the week ended Oct. 8, down 68 percent from the previous week and 47 percent from the four-week average. The featured buyers were Indonesia, Vietnam, South Korea, and Pakistan. Export shipments totaling 67,400 bales for the week were down 47 percent from the previous week and 26 percent from the four-week average. Mexico, Vietnam, Turkey, and Indonesia were the primary destinations.