ICE cotton ends up as dry Texas fields offset hefty Indian crops

US cotton futures finished moderately higher on Tuesday, holding to the middle of a seven-week range as support from dry Texas cotton fields amid healthy US demand was offset by pressure from hefty global crops. Many players held to the sidelines - December cotton volume was a light 8,452 lots - and waited for the US Department of Agriculture's August supply/ demand report due August 12.
Brokers said they are waiting to see if the US crop tally comes in higher than USDA's July production estimate of 13.5 million bales, as some analysts have suggested, despite the potential failure of a large percentage of the Texas crop. Texas, the largest US cotton growing state, has had dry, hot weather across a huge expanse of cropland, putting much of the state's cotton in jeopardy. "The market is torn between the bearish global fundamentals of a strong dollar, potential record crop in India, and if not a slower at least an altering economy in China," said Keith Brown, cotton broker at Keith Brown and Associates. He added that those macro factors are currently being balanced by the bullish micro fundamentals of a tight a US market with healthy mill demand in North Carolina and elsewhere.
"They will not buy Texas cotton, but they will buy the South-eastern US crop. That crop is running late and some of it has damage," said Brown, noting that demand tightness has led to an inverted market with nearby October and December contracts priced higher than later-dated futures contracts.
Benchmark December cotton futures on ICE Futures US finished up 0.49 cent, or 0.6 percent, to settle at 85.69 cents per lb. Many players want to see how the USDA reads the current supply both in the United States and the global market, with many analysts expecting an increase in the department's estimates. In India, the world's second largest producer, concerns over crop output and quality pushed prices up, due to excess rains in the western state of Maharashtra.
Heavy rainfall in India's central and western states in the last two weeks has damaged soybean, groundnut, cotton and pulse crops in some pockets, and experts say if the region gets more rainfall damage could rise significantly. India's cotton prices are also seen rising this week after the government eased restrictions on exports by the Cotton Corp of India (CCI) late last week.