Spot rate unchanged on cotton market

LAHORE: Dullness prevails in the local cotton market on Saturday while the trading volume low.

Cotton Analyst Naseem Usman told Business Recorder that Spot Rate remained unchanged. He also told that rate of cotton in Punjab and Sindh is in between Rs 18000 to Rs 20,000 per maund.

Cotton Analyst Naseem Usman told that cotton market ranged from sharply higher to limit up Friday, amid brewing weather troubles for West Texas, plus a recent slew of strong export sales. The latest weather models are indicating a period of inordinate dryness for West Texas. Additionally, rising outside markets help rush cotton prices higher as well.

Friday afternoon, CFTC will update various trader positions, but keenly watched are the managed-money funds. At last count they were just north of 70,000 contracts net long, having sold 4,000 or so contracts. The weekly data is as of the close of each Tuesday, thus either the market is ahead or those speculators are running behind.

President Biden and President Xi spoke Friday for two hours on a narrow range of topics, namely, Ukraine-Russia and trade. Naturally, cotton wasn’t specifically mentioned, but nothing in the conversation would suggest a further trading riff. China is the No. 1 buyer of US cotton.

Friday, May cotton settled at 126.86 cents, up 5.00 cents, July closed at 123.03 cents, up 4.93 cents and December finished at 105.24 cents, 1.72 cents higher; estimated volume was 38,720 contracts.

Moreover, ICE cotton futures jumped more than 4% to their daily trading limit on Friday, driven by strong buying activity from mills.

The most active May cotton contract on ICE futures rose 3.90 cents, or 3.2%, to 125.76 cents per lb, at 11:21 a.m. ET. Prices traded with within a range of 121.84 and 126.86 cents a lb.

“Mills have all these fixations to make,” said Jim Nunn, owner of Tennessee-based cotton brokerage Nunn Cotton, and the stark move could have been accentuated by relatively light volumes.

“Demand for US cotton is still good, but on the supply side there is not much left in the country to buy.”

When mills enter into contracts with merchants to buy cotton, a futures contract is usually sold to hedge the transaction. This contract is then bought back at a later stage once the mills fix the actual price for the physical commodity.

“Mill on-call commitments against all active contracts were approximately 200,000 bales higher for the week ending March 11 vs. the previous assessment period at around 14.3 million bales. Producer commitments were off slightly at approximately 4.7 million bales,” said Louis Rose of Tennessee-based Rose Commodity Group said in a note dated Thursday.

“The gap between on-call sales and purchases could become a major bullish factor over the near-to medium-term,” Rose added.

The US Department of Agriculture’s weekly export sales report on Thursday showed net sales of 371,400 running bales of cotton for 2021/2022, up 5% from the previous week and 34% from the prior four-week average. Increases were primarily for China.

Total futures market volume fell by 1,081 to 22,394 lots. Data showed total open interest gained 1,574 to 222,184 contracts in the previous session.

The Spot Rate remained unchanged at Rs 20,000 per maund. Polyester Fiber was available at Rs 285 per kg.

Copyright Business Recorder, 2022