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Cotton Market Weekly (17/07/2015)

The summer doldrums appear to have a grip on the cotton market as traders continue to report dull conditions in most raw cotton import markets due to seasonal factors and spinners’ resistance to current prices. Although cotton-related news was light this week, some analysts continue to note a number of negative factors facing the market. They include weak data for the U.S. economy, the continuing sell-off in China’s stock market, disappointing cotton imports by China, and the cotton being sold from India’s reserve.

This week began on a quiet note at the Intercontinental Exchange (ICE) as volume was the lowest since June 24, and cotton futures traded in a narrow range. At least one market observer was impressed by December cotton’s ability to settle unchanged at 65.52 cents per pound. Also on Monday, USDA released its weekly U.S. Crop Progress and Conditions report.

The report showed 61 percent of the nation’s crop was squaring, slightly behind the five year average of 70 percent. It also noted 18 percent of the crop was setting bolls compared to the five year average of 24 percent. Overall crop conditions remain good with 57 percent rated good to excellent and 35 percent fair. The Texas crop was rated 51 percent good to excellent and 40 percent fair.

Cotton futures rallied Tuesday as contracts spent most of the session on positive ground possibly due to a weaker dollar. All contracts posted moderate gains at the close of trading with December leading the way, settling 61 points higher at 66.13 cents per pound. Some traders noted the market seemed to ignore the good crop conditions report and selling pressure in other commodities.

Cotton futures took a sharp nosedive Wednesday as selling pressure sent the December contract to a low of 64.60 cents before settling at 64.87, down 126 points, and near the low end of a 161-point trading range. The pressure also carried forward to 2016 contract months at ICE. A stronger dollar and disappointing U.S. retail sales in June may have weighed on the market.

December cotton managed to regain some of its losses during Thursday’s ICE session as buyers returned to the screen. The contract finished in the upper half of a narrow 73-point range, settling 37 points higher at 65.24 cents per pound.

Other news Thursday included USDA’s export sales and shipment report which showed net sales of U.S. upland cotton totaled 51,200 bales for 2014-15 in the week ended July 9, up 69 percent from the previous week but down 9 percent from the four-week average. Vietnam, Turkey and China were the featured buyers. Net sales for delivery in 2015-16 totaled 107,700 bales, primarily for El Salvador and Thailand. Export shipments totaled 136,200 bales, down 36 percent from the previous week and 35 percent from the four-week average. Turkey, Vietnam, Mexico, South Korea, and Indonesia were the primary destinations.

Meanwhile, growing conditions in West Texas were near ideal this week, possibly allowing the cotton crop to make up some ground lost due to its later-than-normal planting. The abundant sunshine and high temperatures also were conducive for producers to continue field work without interruption. A heat advisory was in place Thursday across the Mid-South and Delta areas with heat index readings expected to exceed 105 degrees. Hot and dry weather also was in place in the Southeast.

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