The cotton market started this week on a positive note, but consolidation ahead of the May contract’s first notice day kept pressure on prices as traders continued to liquidate their May positions during the following three sessions at the Intercontinental Exchange (ICE). Analysts also noted volume at the exchange was driven by spread trading this week.
Cotton futures started lower Monday but worked their way to modest gains by the close of a moderately active session. July, now the lead contract, settled 6 points higher at 65.46 cents per pound, and December cotton settled at 65.77 cents, up 16 points. Almost 85 percent of the session’s volume was the result of spread trading.
The U.S. Department of Agriculture released its crop progress report Monday which showed only 4 percent of anticipated U.S. cotton acreage had been planted versus 8 percent at this time last year and the five-year average of 8 percent. One analyst noted it is still early in most of the Cotton Belt for widespread planting, but wet fields and forecasts for more rain are keeping many farmers out of their fields. The situation early this week was most critical in South Texas where farmers were facing an April 15 planting deadline for crop insurance. Some analysts believed the potential impact had not been fully realized by traders.
Cotton futures opened lower Tuesday at ICE and spent much of the session in negative territory. July cotton traded down to 64.83 cents before recovering and settling at 65.02, down 44 points. December settled 50 points lower at 65.27 cents per pound. Trading activity was much slower than Monday’s session, but spread trading and May liquidation continued.
July cotton on Wednesday settled at its lowest level in seven sessions as volume continued to decline. The contract settled at 65.00 cents, down 2 points, and December settled 21 points lower at 65.06 cents per pound. Some traders at mid-week were keeping an eye on West Texas weather as recent precipitation has improved soil moisture conditions. Also on Wednesday, traders and analysts were not expecting a positive weekly export sales and shipment report from USDA.
The report, released early Thursday morning, contained a net reduction of 21,800 bales in U.S. export sales for the week ended April 9 following cancellations by China, Japan, Italy, and Turkey. Export shipments for the week also were lower at 201,500 bales, down 54 percent from the previous week and 40 percent from the four-week average. The primary destinations were China, Turkey, Vietnam, Indonesia, and South Korea. One positive element of the report was net sales of 52,500 bales for delivery in the 2015-16 marketing year. The featured buyers were South Korea, Vietnam, Taiwan, and Indonesia.
The export report seemed to add selling pressure at ICE as contracts fell by more than 100 points during the ensuing 30 minutes. Contracts, however, recovered some of their losses ahead of the close of trading. July cotton settled at 64.58 cents, down 42 points, and December settled 44 points lower at 64.62 cents per pound.
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