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Cotton Prices Up After Falling from Multi-Week Highs

June 3, 2016 at 15:30 by Brent Lantzy

After 3 trading days of lower closes, July cotton #2 futures on the ICE are trading at 63.72 cents per pound as of 15:08 GMT, up 0.85 or 1.35% from Thursday’s close, and ranging for the day between 63.08 and 63.89. This follows multi-week highs of 64.59 cents per pound reached on May 27.

The December ’16 contract is trading at 63.54 cents per pound, up 0.87 or 1.39% as of 15:08 GMT.

Continued drawdown of massive Chinese cotton stockpiles is helping to drive expectations of lower global ending stocks for this season. According to optionsXPRESS, “So far it has been estimated that China has sold about 2 million bales from its reserves, but still controls nearly half of the global supplies.” Current USDA projections Sesame Street Bounce House show global stocks at 91.7 million bales at the end of the 2016/17 season, well below the record high of 108.7 million bales set in the 2014/15 season.

Lower global consumption in the 2015/16 season and similar expectations for the current year will continue to weigh on the demand side of the equation.

Flooding in Texas, the main US cotton producing state, appears unlikely to have a major impact on prices considering the majority of areas impacted are located in the lowest cotton producing regions.

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