ICE cotton gains driven by short covering, crop concerns in US, Brazil

24 May '24

2 min read

ICE cotton gains driven by short covering, crop concerns in US, Brazil

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Insights

ICE cotton gained for 2nd consecutive session on Thursday, with the July contract up 3 per cent due to short covering, weather concerns and average export sales.
The US dollar's rise made cotton more expensive for foreign buyers.
Trading volumes surged as traders covered short positions.
The USDA reported a net increase of 203,000 bales in US export sales.

ICE cotton continued to gain for the second consecutive trading session on Thursday. The July contract increased by 3 per cent due to short covering, weather concerns in the US and Brazil, and an average export sales report. External factors, however, remained unfavourable for the cotton market.

According to trade analysts, the US cotton July contract settled 234 points higher at 81.72 cents per pound (0.453 kg). The contract reached a one-month high due to various factors, touching as high as 82.60 cents, the highest since 23 April. The December contract settled at 78.63 cents, up 134 points on Thursday.

Yesterday, the dollar index settled above 105 with gains. An increasing US dollar is making cotton purchases expensive for foreign buyers. Crude oil was weaker due to slow demand and negative data, which also helped cotton prices to decline.

Significant improvement was seen in trading activities yesterday. The volume was noted at 72,576 contracts, the highest for the current month. This surge was driven by traders covering their short positions, further amplifying the gains. ICE shows that certified stock was 191,522 bales, slightly down from 191,566 bales.

The USDA's weekly export sales report revealed a net increase of 203,000 bales in US cotton export sales for the current market year. Export shipments reached 204,100 bales, with China being the primary destination. New and aged cotton export sales to China increased by 13,200 bales and 104,000 bales, respectively, while export shipments totalled around 84,600 bales. Continued buying from China relieved pressure on cotton prices.

Current reports of production losses in Brazil and China also contributed to the price surge. Flooding in Brazil has raised concerns about crop planting. Excessively wet conditions in the US are also supportive of cotton markets. Cotton traders are now focusing on weather conditions around the globe and speculative moves.

On Friday, ICE cotton July 2024 was traded 0.32 cents lower at 81.40 cents per pound. The contract continued to rise in the last session. Cash cotton was traded at 77.97 cents (up 2.84 cents), the October (new crop) contract at 79.62 cents (up 1.34 cents), the December 2024 contract at 78.29 cents (down 0.33 cents), the March 2025 contract at 79.73 cents per pound (down 0.30 cents), and the May 2025 contract at 80.91 cents (down 0.33 cents).

Fibre2Fashion News Desk (KUL)

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