Hurricane watch expected to be expanded northward. China¢s cotton imports projected to remain stagnant despite expansion in mill use, FAS report says. Slower U.S. weekly export sales expected.

Cotton futures closed slightly lower for a second session Thursday, as traders awaited the U.S. weekly export sales report and kept an anxious eye on the track of massive Hurricane Irma still churning toward Florida.

December settled down 23 points to 74.27 cents, in the upper quarter of its 111-point range from down two points at 74.48 to down 113 points at 73.37 cents. March closed down 32 points at 72.92 cents, trading within a 109-point range from 73.19 to 72.10 cents.

A hurricane watch has been issued for South Florida, the Florida Keys, Lake Okeechobee and Florida Bay. The watch was expected to be expanded northward later in the day. The chance of direct impacts is increasing for portions of Georgia, South Carolina and North Carolina, the National Hurricane Center said, but added that it is still too early to specify the magnitude and location.

Volume slowed to an estimated 26,652 lots from 47,226 lots the prior session when spreads accounted for 15,162 lots or 32%, EFS 777 lots and EFP 304 lots. Options volume declined to 15,102 lots (9,873 calls and 5,229 puts) from 22,447 lots (6,916 calls and 15,531 puts).

December hadn¢t posted back-to-back losses since a three-day string of lower closes ended Aug. 17, after which it had closed higher 12 of the next 13 sessions prior to Wednesday¢s reversal down. At Wednesday¢s high, December had gained 901 points or 13.5% from the Aug. 17 low.

With momentum flashing overheated readings amid signs of stepped up producer selling, some traders may have decided to take some profits despite Irma tracking toward the nation¢s second largest cotton-producing region.

Traders also took note of a U.S. agricultural attach report that the expected sales of government-held stocks and restrictions on additional import quotas are unlikely to allow significant increases in China¢s imports this season.

China¢s cotton imports are expected to remain stagnant at 5 million 480-pound bales, USDA¢s Foreign Agricultural Service post in Beijing said. This is unchanged from USDA¢s official estimate for last season.

Still, the Chinese textile industry continues to seek higher-grade cotton from foreign suppliers to stay competitive. Anecdotal reports also have circulated that the government might consider special approval for imports of high-grade cotton to improve the mix of the state reserves.

Higher cotton prices in 2016-17 and continued government support to cotton production stimulated a 5.9% expansion in China¢s planted cotton area, the post said. Citing expected good yields, the post projected 7.1% increase in production to 24.6 million bales.

China¢s cotton consumption, the world¢s largest, is projected to grow a million bales to 38.5 million, mainly owing to the narrowing gap between domestic and global cotton prices. Increased cotton utilization is expected to reduce yarn imports.

Correspondingly, the post forecast ending stocks to decline to 39.66 million bales from its estimate for 2016-17 of 48.61 million, with the stocks to use ratio dropping to 102.9% from 129.4%.

Looking to Friday¢s delayed export sales report, traders expect higher prices, heavy commitments already on the books and uncertainties about the quantity and quality of the U.S. crop to result in a slowdown. Sales have consistently topped expectations and commitments stand at the second highest on record for this point in the marketing year.

Futures open interest grew 3,184 lots to 237,984 on Wednesday, with December¢s up 1,797 lots to 145,419 and March¢s up 898 lots to 65,460. Open interest was up 18,406 lots from Aug. 16.

Certified stocks were unchanged at 8,730 bales. Warehouses containing cert stocks in Houston and Galveston have now reopened and reported no damages to facilities or the contents.