The cotton market broke out of its recent bearish pattern Thursday following the release of a much improved weekly export sales and shipment report by the U.S. Department of Agriculture. Steady buying at the Intercontinental Exchange (ICE) lifted futures contracts to sharp gains following the report’s release.
USDA reported net sales of U.S. upland cotton totaled 144,900 bales in the week ended April 16, up significantly from the previous week’s report which showed a net decline in U.S. export sales. China, Colombia and Vietnam were the featured buyers in the most recent week. The department also reported net sales of 67,100 bales for delivery in the 2015-16 marketing year, primarily for South Korea, Colombia and Guatemala. Export shipments for the week totaled 324,200 bales, up 61 percent from the previous week. The primary destinations were China, Vietnam, Turkey, South Korea, and Mexico.
During Thursday’s ICE session, July cotton broke its pattern of lower highs and lower lows during the 10 previous sessions. The contract settled at 65.45 cents per pound, up 253 points. December cotton settled 151 points higher at 65.14 cents. A weaker dollar index also may have added some fuel to the fire.
The week began with cotton futures settling mixed Monday as contracts worked lower due to selling pressure. July cotton traded briefly below 63.00 cents before it worked back to positive territory and settled 10 points higher at 63.39 cents per pound, the first time in four consecutive sessions it did not settle lower. The December contract settled at 63.51 cents, down 13 points, in a somewhat quiet session.
USDA’s weekly crop progress report also was released Monday. It showed 8 percent of anticipated U.S. cotton acreage had been planted as of April 19 compared to 9 percent a year ago and the five- year average of 11 percent. Only 7 percent of Texas acreage had been planted versus 12 percent a year ago and the five-year average of 14 percent. The lagging pace of planting this year’s crop is due to wet conditions in much of the U.S. Cotton Belt, although it is still quite early in the season.
Cotton futures resumed their downward movement Tuesday as the four front months all settled lower. July cotton settled at 62.99 cents, down 40 points, and December was 6 points lower at 63.45 cents per pound. According to one analyst, the market continues to be preoccupied with the liquidation of the May contract ahead of first notice day.
Wednesday’s ICE session was much like Monday’s as cotton futures settled mixed as selling pressure continued. The July contract settled 7 points lower at 62.92 cents per pound, but December settled 18 points higher at 63.63 cents. One market observer thought support near the end of the session may have come from new business and active fixation buying as the recent decline in futures prices may have stimulated some fresh demand and inquiry. He added prices may be approaching a point of equilibrium.
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