ICE cotton hits new low; higher inflation spoils sentiments

ICE cotton May 2024 contract touched two months low to settle at 85.31 cents per pound of 0.453 kg. However, it recovered slightly in the last session to trade at 85.39 cents per pound.

In the latest session, the ICE cotton cash price lost 0.73 cent to end at 81.81 cents. July 2024 contract gained 0.10 cent to 87.17 cents, while the October 2024 (new crop) contract dipped by 0.03 cent to 82.66 cents per pound. The December 2024 contract noted down 0.05 cent to 81.38 cents. March 2025 too was noted down 0.03 cent to 82.50 cents per pound. Most of the contracts were traded lower in day trading session.

According to a market analyst, ICE cotton noted heavy volume with near 75,000 lots traded but open interest declined. Dollar index was slightly up, putting pressure on cotton market, though gains were minimal. The price of crude oil further declined and neared to $85 per barrel which was also a negative factor for cotton futures.

US Consumer Price Index (CPI) rose 0.4 per cent on a monthly basis and 3.5 per cent year-on-year, as per the latest official data. Higher inflation forced traders to adjust their calculations regarding potential Federal Reserve rate cuts. Now, the probability of a rate cut in June has decreased. US dollar index also surged 1.04 per cent to reach at 105.18 per cent. It made cotton purchase more expensive for international buyers, further pressuring cotton futures.

Thunderstorms were reported in West Texas and sporadic storms in central and southern cotton growing regions of the US.

Despite decrease in value and open interest, cotton futures saw robust trading volume, with 94,166 contracts traded. This divergence between value and volume suggests significant market activity. Notably, open interest in cotton futures experienced substantial growth from December to its peak in April, adding almost 90,000 contracts. However, over 40,000 contracts were liquidated in the last five sessions, indicating shifting market dynamics.

On April 10, open interest declined by 13,268 contracts, marking one of the highest daily drops in cotton’s history. This reflects changing investor sentiment and trading strategies. Certified stocks in ICE exchange available for delivery, increased by 10,402 bales on April 10, and reached 136,124 bales.

Fibre2Fashion News Desk (KUL)