Cotton Showing Sligh Strength on Thursday

Cotton futures are trading higher, driven by positive export sales data; USDA's report indicated 109,785 RB of 2024/25 cotton were sold, a 4-week low, while new crop business reached a 7-week high, with Vietnam being a major buyer. Export shipments also saw a 3-week high, with Turkey and Vietnam as top destinations, and April exports hit a 3-year peak, up 37.19% year-over-year, though down from March.

Analysis

Cotton futures are exhibiting positive momentum, with contracts advancing by 11 to 31 points at midday, influenced by a $0.61/barrel rise in crude oil prices and a stable US dollar index at $98.725. The USDA's Export Sales report for the week ending May 29 indicated that 2024/25 cotton sales totaled 109,785 running bales (RB), a 4-week low, with Bangladesh (34,200 RB) and Vietnam (24,700 MT) as principal buyers. Conversely, new crop business reached a 7-week peak at 38,984 RB, largely driven by sales to Vietnam (17,900 RB). Export shipments also showed strength, hitting a 3-week high of 316,134 RB, with Turkey (98,300 RB) and Vietnam (87,400 RB) being the top destinations. Census data highlighted robust export activity in April, with 1.66 million bales (excluding linters) shipped, marking a 3-year high and a 37.19% increase year-over-year, despite a 9.47% contraction from March levels. Other market indicators include 309 bales sold at an average price of 69 cents/lb in Wednesday's auction from The Seam, the Cotlook A Index declining 35 points to 78.25 on June 4, and certified ICE cotton stocks remaining steady at 53,700 bales. The USDA’s Adjusted World Price (AWP) increased 32 points to 53.84 cents/lb in the previous week, with an update anticipated later today. Current futures prices reflect this positive sentiment, with Jul 25 Cotton at 65.3 (up 31 points), Oct 25 Cotton at 67.52 (up 11 points), and Dec 25 Cotton at 67.95 (up 18 points).

Key Decisions for Investors

• Investors should closely monitor the upcoming USDA Adjusted World Price update and ongoing export sales figures, particularly focusing on new crop bookings, to assess the sustainability of current demand.
• While the strong new crop sales and a 3-year high in April export volumes present bullish signals, caution is warranted due to the 4-week low in overall 2024/25 sales and the recent dip in the Cotlook A Index.
• Continued observation of demand patterns from key importing nations such as Vietnam, Bangladesh, and Turkey will be critical for evaluating potential price trajectories and informing investment strategies.