Commodity prices and equity market values plummeted this week on growing concerns about China’s economy. Starting last Friday, Aug. 21, when stock markets around the world went into free fall, cotton futures suffered a four-consecutive-session losing streak and dropped 363 points, erasing almost all of the gains accumulated following USDA’s August supply and demand estimates.
Monday’s session at the Intercontinental Exchange (ICE) saw most cotton futures contracts trading at near limit losses as pressure mounted. October cotton settled down the 300-point limit at 64.64 cents per pound. December cotton was close behind, settling at 64.05 cents, down 286 points. All other futures contracts settled with triple digit losses in a very active session as speculators quickly exited their long positions.
Cotton market jitters continued Tuesday with more speculative long liquidation at ICE. December cotton moved as high as 64.82 cents during early trading before the sellers returned and sent the contract lower. December traded as low as 62.86 cents but managed to settle at 63.16 cents per pound, down 89 points. Other than October cotton, which settled 88 points lower, all other futures contracts settled with slightly greater losses as the market remained on the defensive.
Selling pressure remained in the market Wednesday and sent December cotton to a low of 62.26 cents around mid-morning. The contract then moved off the low and traded 35 to 75 points lower for the remainder of the session, settling 65 points lower at 62.51 cents per pound. Traders continued to mention China’s economy as well as other global economic problems.
Cotton finally caught a break Thursday as futures traded on positive ground for most of the ICE session. December cotton traded within the previous session’s range and settled 84 points higher at 63.35 cents and near the top of its 102-point range. At one point, it appeared sellers were going to send the contract lower, but buyers returned and sent the contract back to positive territory. One analyst called it an oversold recovery.
Thursday’s market action may have received a boost from better-than-expected U.S. economic data. An improvement in the domestic GDP to an annualized rate of 3.7 percent was much better than the initial estimate of 2.3 percent growth, according to one analyst. Increased consumer and business spending indicated the U.S. economy was getting back on track, he noted.
In other news this week, USDA reported net upland export sales of U.S. cotton totaled 61,100 bales in the week ended Aug. 20. The sales figure was considered modest by most market observers. Colombia, Mexico, Costa Rica, Turkey, Indonesia, and Vietnam were the top buyers. Export shipments for the week totaled 102,500 bales, and the primary destinations were Turkey, Mexico, Vietnam, and Indonesia.
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