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Cotton goes negative on higher plantation in US, strength in dollar

This week, ICE Cotton July contracts remained under pressure and hit more than two week's low of 61.63 cents per pound. A pickup in the pace of cotton planting in the US and renewed strength in the US dollar index acted as negative factors for the dollar-denominated fiber prices.

According to the US Department of Agriculture (USDA) weekly cotton planting report, favourable climatic conditions in the US helped speed up the fiber planting in the country, with 16 per cent of cotton planting complete, up compared to 10 per cent in the prior week and against 15 per cent last year.

Moreover, the start of China's auction from its huge reserve stock also kept prices under check. The agency is expected to release up to 2 million tonnes of cotton from its reserves. Sale of the country's cotton reserves that started on May 3 would continue till August 31, 2016.

Additionally, industry group International Cotton Advisory Committee (ICAC) raised its estimates for global output to 22.96 million tonnes while lowering its demand forecast by 120,000 tonnes to 23.77 million tonnes, leaving the world with an ending stock at 19.59 million tonnes for the 2016-2017 season, which is higher than expected projections.

In addition to this, continuous rise in ICE stock level also exerted pressure on prices this week. Exchange inventories stood at 61,273 (480-lb) bales as of May 4, 2016, up more than 6 per cent from 57,746 bales as of April 29, 2016.

 
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