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Cotton Market Weekly(19/2/2015)

Cotton futures enjoyed a nice winning streak, settling higher four consecutive sessions at the Intercontinental Exchange (ICE) before reversing course Thursday. During the streak, some traders suspected speculative buying was providing most of the market’s strength. At the close of last week, March cotton had gained 111 points, and May had gained 169 points

Following Monday’s market holiday, cotton resumed its advance Tuesday as the lead May contract moved through 63.00 and then 64.00 cents per pound and topped at 64.74 before settling at 64.53 cents, up 121 point and its highest level since Sept. 19. March cotton, with first notice day on Feb. 23, settled 110 points higher at 63.80 cents per pound. December settled 84 points higher at 64.91. Grain and oilseed futures also were higher, and the dollar index was weaker.

The advance continued during Wednesday’s ICE session as May topped at 65.44 cents before pulling back slightly and settling at 65.32, up 79 points. March settled 82 points higher at 64.62 cents per pound, and December was up 56 points at 65.47 cents. It was the 13th session out of the last 17 that both March and May settled on positive ground. During the run, trading volume at ICE remained strong.

As one market observer noted, all good things must come to an end, and that was the case Thursday. Cotton futures traded on both sides of unchanged during the session before settling lower across the board. Another observer said it appeared the market had become overbought. May cotton settled at 64.69 cents, down 63 points, March was 18 points lower at 64.44, and December settled at 64.84 cents, down 63 points.

USDA’s 91st Agricultural Outlook Forum began Thursday morning in Washington, DC. The department’s Acting Chief Economist Robert Johansson estimated U.S. cotton area for the 2015-16 marketing year will be 9.7 million acres, up slightly from the National Cotton Council estimate of 9.4 million. The USDA estimate is down 12.1 percent from last year’s 11.0 million acres. Johansson also projected the average farm price for cotton will be 60.00 cents per pound in the coming season.

The department released more details during Friday morning’s session, projecting U.S. production in 2015-16 at 14.0 million bales based on 8.4 million harvested acres and an average yield of 800 pounds. U.S. mill use was pegged at 3.75 million bales and exports at 10.2 million. World consumption is expected to exceed production for the first time in six years; however, global ending stocks will remain high. China’s production is expected to decline to 28.0 million bales, and consumption should rise to 37.5 million bales. USDA also reported India will remain the world’s largest producer with a crop of 30.0 million bales, down 500,000 from 2014-15.

In another report during the Forum, Agriculture Secretary Tom Vilsack said trade promotion authority and completion of trade agreements will be a priority for agriculture this year. He added that 2015 will be the year of market and product expansion.

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