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

Cotton prices, represented by Cottoncandy, saw a decline of -0.7%, settling at 56380, driven by a bearish outlook in the global cotton market. The International Cotton Advisory Committee (ICAC) projected a surplus in global cotton production for the second consecutive year, as production is expected to outpace consumption. Global cotton lint production is forecasted to grow by 3.25% year-on-year to 25.4 million metric tons in the 2023-2024 season, while consumption is anticipated to marginally decline to 23.4 million metric tons. 

The Cotton Association of India (CAI) revised its cotton production estimate for the current 2023/2024 season to 29.4 million bales due to damage caused by pink bollworm infestation in Haryana and farmers uprooting plants. Additionally, a substantial 25% decline in cotton production is expected in north Maharashtra due to inadequate rainfall. The U.S. Department of Agriculture (USDA) also reported an increase in anticipated U.S. cotton production for 2023/24, leading to higher global ending stocks. The 2023/24 U.S. cotton balance sheet shows slightly lower consumption but higher production and ending stocks, with global cotton balance sheets indicating lower consumption but higher production and stocks. The bearish sentiment was further fueled by a 5-week low in global cotton bookings for the last week of November, indicating sluggish demand. In the Rajkot spot market, the price ended at 26393.05 Rupees, gaining by 0.15%. 

Technically, the market is under fresh selling pressure, with a 4.46% increase in open interest to settle at 164 contracts. Cottoncandy is currently finding support at 56080, with a potential test of 55790. On the upside, resistance is likely at 56580, and a move above could see prices testing 56790.

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