ICE cotton dips amid lower oil prices, high production forecasts

Yesterday, the ICE cotton March 2025 contract settled at 71.25 cents per pound (0.453 kg), down by 0.02 cents.

The cotton market's sentiments were influenced by a weaker dollar, which makes cotton purchases more affordable for international buyers holding other currencies. Oil prices slipped nearly 2 per cent on Wednesday ahead of the OPEC+ production cut decision. However, a larger-than-expected drop in US crude inventories provided support to some extent.

Traders are watching the USDA's weekly export sales report, set for release on Thursday, to gauge the demand outlook. Upland cotton sales have reached market-year highs in the last two weeks, suggesting improving demand.

The International Cotton Advisory Committee (ICAC) estimates global cotton production for 2024-25 at 25.299 million tons, revised upwards from the previous month's estimate, reflecting a 4.9 per cent year-on-year increase. Global cotton production for 2023-24 is estimated at 24.123 million tons.

ICAC projects the global cotton ending inventory for 2024-25 at 18.4703 million tons, slightly higher than the previous estimate of 18.4610 million tons but a 0.5 per cent year-on-year decline. The global cotton ending inventory for 2023-24 is estimated at 18.5627 million tons.

As of December 3, ICE deliverable No. 2 cotton futures contract inventory stood at 13,274 bales, unchanged.

All three major US stock indexes closed at record highs on Wednesday, driven by a rebound in technology stocks and positive comments from Federal Reserve chairman Jerome Powell. At an event on Wednesday, Powell stated that the US economy is performing well, the risks in the labour market are diminishing, economic growth has exceeded expectations, and inflation rates are slightly higher than anticipated. He expressed that this positive outlook allows for a more cautious approach as efforts are made to achieve a neutral economic stance.

In other agricultural markets, Chicago Board of Trade (CBOT) soybean futures declined due to pressure from expectations of a record soybean harvest in Brazil.

Currently, ICE cotton for March 2025 is trading at 71.30 cents per pound (up 0.05 cents). Cash cotton is trading at 67.25 cents (down 0.02 cents), the December 2024 contract at 72.60 cents per pound (down 0.09 cents), the May 2025 contract at 72.53 cents (up 0.03 cents), the July 2025 contract at 73.53 cents (up 0.10 cents), and the October 2025 contract at 72.55 cents (up 0.10 cents). A few contracts remained at the level of the last closing, with no trading noted today.

Fibre2Fashion News Desk (KUL)