ICE Cotton surges on short covering, crop concerns, stronger crude oil

ICE cotton prices increased yesterday due to concerns about crop damage from recent hurricanes, short covering, and stronger crude oil prices following heightened tensions in the Middle East. Traders rushed to cover their short positions ahead of the USDA export sales report, which is due today.

On Tuesday, the ICE December cotton contract settled at 73.40 cents per pound (0.453 kg), up by 0.31 cents.

ICE cotton prices rose due to hurricane damage, short covering, and stronger crude oil prices linked to Middle East tensions.
Trading volumes dropped as holidays in China and India contributed to lower activity.
Hurricane damage estimates and a dockworkers’ strike added to concerns, while traders await the USDA export sales report for further clarity.

Crude oil prices rose as investors worried about the potential impact of increasing conflicts in the Middle East. Higher crude oil prices support US cotton prices by raising the cost of polyester production, a key alternative to cotton. However, the dollar index strengthened yesterday, which limited cotton’s gains as overseas buyers were discouraged by the more expensive purchases.

The trading volume was 28,113 contracts, significantly down from the previous day’s volume of 43,556 contracts, marking the lightest trading since September 13. Total open interest on October 2 began at 233,189 contracts, reflecting an increase of 2,573 contracts from the previous day.

Several countries, including China and India, were on holiday, contributing to the lower trading volume. As of October 1, ICE deliverable No. 2 cotton futures contract stocks remained unchanged at 265 bales.

Damage from Hurricane Helene remains a significant concern, with estimated losses ranging between 300,000 and 500,000 bales of cotton. The US textile industry has also faced disruptions due to the hurricane’s impact.

Meanwhile, the strike by dockworkers on the US East and Gulf Coasts entered its second day, with concerns over job automation central to the negotiations.

A risk management consultant noted that speculative buying or short covering supported the December cotton contract, but momentum was lacking. Cotton’s market share in the fibre industry has declined, and demand is expected to increase gradually but at a slow pace.

Traders are now eagerly awaiting the US Department of Agriculture’s weekly export sales report, due on Thursday, for more insights into cotton demand.

Currently, ICE cotton for December 2024 is trading at 73.28 cents per pound, down 0.12 cent. Cash cotton is trading at 66.90 cents, up 0.31 cent. The October contract is at 73.16 cents, up 0.16 cent; the March 2025 contract is at 75.25 cents, down 0.13 cent; the May 2025 contract is at 76.51 cents, down 0.10 cent; and the July 2025 contract is at 77.38 cents, up 0.13 cent. A few contracts remain unchanged from the last closing, with no trading activity observed today.

Fibre2Fashion News Desk (KUL)