Cotton jumps 4 percent on US-China trade thaw hopes

ICE cotton futures jumped about 4 percent to a more than one-month peak on Thursday, supported by hopes of a thaw in the ongoing US-China trade tensions. The developments surrounding trade also helped offset slight headwinds from a monthly US government World Agriculture Supply and Demand Estimates (WASDE) report, which projected lower demand in the United States and higher world ending stocks for the 2019/20 crop year.

"There is increased optimism with China and maybe we are getting closer to getting something done and so the cotton, soybean and hog markets in particular rallied," said Jon Marcus, president of Lakefront Futures and Options brokerage in Chicago. US trade advisers have discussed offering China a limited trade deal that would delay and even roll back some tariffs for the first time in return for Chinese commitments on intellectual property and agricultural purchases, Bloomberg reported, citing people familiar with the matter.

However, uncertainties prevailed as Bloomberg's report was contradicted by a CNBC report that a senior White House official said an interim deal was "absolutely not" on the table. The most-active cotton contract on ICE Futures US, the second-month December contract was up 2.4 cents or 4% at 61.72 cents per lb as of 12:42 p.m. EDT (1642 GMT), having touched 61.76 cents earlier, its highest level since Aug. 2.

The US Department of Agriculture's monthly report forecast world ending stocks for 2019/20 to be 1.3 million bales higher than last month's forecast, at 83.7 million bales, which is 2.9 million bales above the revised 2018/19 estimate. "The fundamentals are still stacked against cotton for now," said Keith Brown, pointing to the relatively bearish WASDE report and weekly export sales data.

Net sales of 74,600 RB for 2019/20 marketing year were down 54% from the previous week, while exports of 166,900 RB were down 28%, the USDA said in its weekly export sales report. Meanwhile, total futures market volume rose by 28,362 to 43,415 lots. Data showed total open interest gained 120 to 229,430 contracts in the previous session.