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Cotton Market Weekly(15/05/2015)

Cotton futures prices enjoyed an impressive rally Wednesday and Thursday after starting this week on a bearish note. The market seemed to ignore disappointing U.S. economic news released early Wednesday, and all futures contracts at the Intercontinental Exchange (ICE) settled with strong gains, possibly bolstered by a weaker dollar.

July cotton settled 75 points higher at 65.77 cents per pound, regaining much of the ground it had lost the two previous ICE sessions, as buyers returned to the screen late in the session. December cotton settled at 65.79 cents, up 96 points.

Momentum was maintained Thursday, and all contracts settled above the 66.00-cent level. July cotton traded as high as 66.73 cents during the session and settled at 66.53, up 76 points and its highest settlement since May 5. December settled 71 points higher at 66.50 cents per pound. A better than expected export report and continued weakness in the dollar may have played a role in Thursday’s market strength, according to some traders.

The U.S. Department of Agriculture reported net export sales of U.S. upland cotton totaled 48,800 bales in the week ended May 7, up noticeably from the previous week but down 27 percent from the four- week average. Featured buyers for the week were Turkey, Bangladesh and Indonesia. Perhaps more impressive were sales for delivery in the 2015-16 marketing year which totaled 79,300 bales, and the top buyers were El Salvador, Indonesia and Vietnam. Export shipments for the week totaled 233,400 bales, down 43 percent from the previous week and 24 percent from the four-week average. The primary destinations were China, Vietnam, Turkey, Mexico, and Indonesia.

Another key report from USDA this week was its monthly supply and demand estimates which included the first glimpse for the 2015 crop. The department estimated U.S. production in the coming season will total 14.50 million bales, down 1.82 million bales from the 2014 crop. Domestic consumption was raised to 3.80 million bales versus 3.65 million, and projected exports were unchanged at 10.70 million bales.

In its world balance sheet, USDA estimated 2015 production at 111.25 million bales, down 8.03 million bales from the 2014 crop. World consumption was raised 3.84 million bales to 115.29 million. Consequently, world ending stocks are now projected to decline almost 4.00 million bales to 106.29 million.

USDA estimated China will produce 27.00 million bales in 2015 compared to 30.00 million last year; however cotton imports are projected to decline 1.70 million bales to 6.00 million. Domestic use in China is expected to total 36.00 million bales, up 1.00 million from last season. It would appear USDA expects China’s strategic cotton reserves will be used to help fill the deficit between production and consumption.

The monthly report also contained data for the 2014 U.S. crop. Production was raised 20,000 bales compared to the April report, but all other estimates were unchanged. Texas High Plains production was estimated at 3.261 million bales, and the Rolling Plains crop was pegged at 817,000 bales. Total Texas production was pegged at 6.175 million bales. Oklahoma’s 2014 crop was estimated at 269,000 bales, and the Kansas crop was estimated at 48,000 bales.

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