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ICE cotton futures rose to a one-week high on Monday, marking its first monthly gain in six months before settling down as worries about US-China trade eased and grains markets rallied on a bullish quarterly stocks report from the US Department of Agriculture (USDA). Cotton contract for December settled marginally down 0.11% at 60.83 cents per lb. It hit 61.13 cents a lb earlier in the session, its highest since Sept. 23.

The most-active contract on ICE Futures US dipped for the second straight quarter, but rose more than 3% in September. "Cotton has been on a sideways trend for quite a while ... Until we get further into the harvest, we cannot see what is really out there," said Jack Scoville, vice president at Price Futures Group in Chicago. "... Or unless we see some big demand in the export sales report, there's really no reason to push this market much more," he said adding that the cotton market was gaining in sympathy with grains markets.

Soya and corn futures rallied on Monday after the USDA reported stockpiles of the crop were smaller than traders expected. The trade war between United States and China has weighed on the demand for cotton, leading to a fall of nearly 17% so far this year.

As part of a broader effort to limit US investment in Chinese companies, sources last week said the President Donald Trump's administration was considering delisting Chinese companies from US stock exchanges. But concerns eased after White House trade adviser Peter Navarro dismissed reports as "fake news." Meanwhile, Brazil's largest grain-grower Terra Santa has begun using complex methods of hedging agricultural commodities to profit from price and trade volatility.

"As Brazil is trying to expand its (cotton) production that's going to hurt our demand potential, especially when we are making everybody mad at us. We've already seen what it's done to our soyabean demand...corn is probably going to follow the same way and then cotton too," added Scoville. Cotton speculators increased their net short position by 2,710 contracts to 35,661 in the week to Sept. 24, according to data from the Commodity Futures Trading Commission released on Friday. Total futures market volume rose by 890 to 21,225 lots. Data showed total open interest gained 746 to 235,477 contracts in the previous session.

Copyright Reuters, 2019

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