Cotton dropped as ICAC projected global cotton production will likely outpace consumption

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Cotton dropped as ICAC projected global cotton production will likely outpace consumption
Credit: © Reuters.

Cotton faced a downturn, settling down by -0.8% at 56780, primarily influenced by the International Cotton Advisory Committee (ICAC) projections indicating that global cotton production is expected to surpass consumption for the second consecutive year. The forecasted growth of 3.25% in global cotton lint production to 25.4 million metric tons in the 2023-2024 season, coupled with a marginal decline in consumption to 23.4 million metric tons, contributed to bearish sentiments. Additionally, sluggish demand, as reflected in a 5-week low of global cotton bookings reported in the last week of November, exerted downward pressure on cotton futures. 

The Cotton Association of India (CAI) revised down its cotton production estimate for the current season to 29.4 million bales due to pink bollworm infestation in Haryana and farmers uprooting plants. A significant 25% decline in cotton production is anticipated in north Maharashtra due to inadequate rainfall. The USDA's November World Agricultural Supply and Demand Estimates report increased the anticipated U.S. production in 2023/24 by 273,000 bales, raising global ending stocks by 1.6 million bales. The U.S. cotton balance sheet for 2023/24 reflects slightly lower consumption but higher production and ending stocks. The global cotton balance sheet for the same period includes lower consumption but higher production and stocks, with a significant increase in beginning stocks due to a rise in India's 2022/23 production. In the Rajkot spot market, the price ended at 26452.15 Rupees, dropping by -0.55%. 

Technically, the market is under fresh selling, with a 3.29% gain in open interest to settle at 157. Prices have decreased by -460 rupees. Cotton candy is finding support at 56660, potentially testing 56530 levels on a further decline. On the upside, resistance is expected at 56960, and a breakthrough could lead to a test of 57130 levels.

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