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Cotton Market Weekly(26/2/2015)

The cotton market cooled off considerably this week as the daily volume of futures contracts traded at the Intercontinental Exchange (ICE) barely exceeded 20,000. Last week, futures settled higher four consecutive sessions through Feb. 18, but this week was more of a roller coaster ride.

The week began with most nearby futures trading in negative territory during much of Monday’s ICE session, perhaps in sympathy to weakness in other commodity complexes. May cotton settled at 64.20 cents per pound, down 46 points, and December settled at 65.29 cents, down 19 points. A stronger dollar also may have contributed to the weaker tone. One good bit of news was the apparent settlement of the labor dispute at West Coast ports which had seriously impacted export shipments of U.S. cotton to Asian mills.

Nearby contracts reversed course Tuesday at ICE, recouping the previous day’s losses, as buying in other commodity markets seemed to spill over into cotton. Traders credited speculators as being the best buyers, according to one analyst. May cotton spent almost the entire day in the plus column as the contract moved through 65.00 cents before stalling and settling at 64.91 cents, up 71 points. The contract traded in the upper half of its 96-point range during the final 50 minutes of the session. December cotton settled 53 points higher at 65.82 cents per pound. It was another slow day for cotton as China remained on holiday, and India sold little cotton.

The momentum continued into Wednesday’s ICE session with option-related buying suspected of helping spur the market at one point. May cotton moved through the 65.00 cent level, even trading as high as 65.91 before easing back from the top of a 163-point trading range and settling at 65.55, up 64 points. It was May’s highest settlement since Sept. 18. The December contract settled 48 points higher at 66.30 cents per pound. Traders also were anxiously awaiting USDA’s latest export sales report to see if another round of cancellations would result in another net reduction in U.S. sales.

The department’s report, released early Thursday morning, did contain some cancellations, but there was enough business to result in net sales of U.S. upland cotton totaling 71,400 bales for the week ended Feb. 19. The featured buyers were China, Vietnam and Japan. USDA also reported net sales of 65,900 bales for the 2015-16 marketing year primarily for South Korea, Turkey and Indonesia. Export shipments for the reporting period totaled 192,200 bales, down 33 percent from the previous week and 32 percent from the prior four-week average. The primary destinations were Turkey, Vietnam, China, Pakistan, and Mexico.

Following the release of the export sales and shipment report, cotton futures hit new highs then moved lower in the final 20 minutes of trading at ICE Thursday. May and forward months hit fresh five-month highs before pulling back, according to one observer. The lead month pushed beyond 66.00 cents before it faltered and settled 34 points lower at 65.21 cents per pound. December settled at 65.80 cents, down 50 points.

The spot cotton market also was much quieter this week as producers sold 22,021 bales online in the week ended Feb. 26, down from 50,738 bales sold the previous week. Average prices received ranged from 46 to 55 cents per pound compared to 49 to 60 cents the previous week.

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