By Cotton futures prices at the Intercontinental Exchange (ICE) rose sharply Thursday following the release of a better than expected export sales report by the U.S. Department of Agriculture. The March contract surged through the 85-cent level moments after the report was released then broke through the 86-cent level as buyers returned to the screen. March settled at 86.19 cents per pound, up 140 points and its highest level in three months. The May and July contracts settled up 146 and 121 points, respectively.
"I suspect that the longs were relieved, if not overjoyed, to see that exports had returned to the levels of mid-December, leaving behind the two weak periods during the holidays," said one analyst. "So, we have gotten the year off to a good start with good business from a number of destinations," he added.
USDA reported net upland sales of U.S. cotton totaled 223,700 bales in the week ended Jan. 9, up significantly from the previous week and 46 percent more than the four-week average. The featured buyers were Vietnam, Indonesia and China. Export shipments that week totaled 217,400 bales, up 3 percent from the previous week and 31 percent from the four-week average. The primary destinations were China, Turkey, Vietnam, and Indonesia.
The spot market also surged this week as producers sold 120,701 bales online through Jan. 16, with 51,016 sold online following Thursday's export sales report. The previous week's online sales totaled 50,890 bales. Average prices received by producers ranged from 75 to 78 cents per pound this week compared to 75 to 77 cents the previous week.
The cotton futures rally at ICE actually began with Monday's session as March cotton settled 109 points higher at 83.68 cents per pound after trading as high as 84.47 and spending the entire session on positive ground. Tuesday's session was more subdued, possibly due to index fund rebalancing. Cotton futures traded on either side of unchanged with traders noting a lack of any fresh news. March cotton settled 5 points higher at 83.73 cents per pound. The only noteworthy news mentioned by one analyst that day was a report from China that said the country's cotton imports in December were up significantly from the previous month.
A flurry of buying in the final hour of Wednesday's ICE session enabled futures to post strong gains at the close of trading as buyers became more aggressive when prices passed the 84.25-cent level, according to an analyst. Ahead of the settlement, March cotton made new lows late morning in New York before rallying to a high of 84.88 and settling at 84.79 cents per pound, up 105 points.
In other news, Cotton Outlook reported this week cotton planting in Argentina and Brazil is virtually complete, and growing conditions are mostly ideal. Beneficial rains earlier this month in Argentina have boosted optimism among producers; however, there appears to be some apprehension among Brazilian producers regarding the potential cost of controlling bollworms.
Meanwhile, the ongoing drought in California has intensified in recent weeks, according to one report, with little chance of improving in the near term. According to the latest drought monitor report, the entire San Joaquin Valley is under extreme drought conditions. Likewise, dry conditions in West Texas have worsened with no precipitation in the near term forecast.
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