Cotton futures soared limit up, topping 80 cents a pound for the first time since May, after the US unveiled a bumper start to 2018 for cotton export sales, and its strongest week for shipments since July.
New York cotton futures for March rose the exchange maximum of 3.00 cents to stand at 82.65 cents a pound in afternoon deals – a contract high, and the strongest level for a spot lot in nearly eight months.
The 3.8% spurt followed the release by the US Department of Agriculture of data showing that in the week to January 4 , US export sales of upland cotton rebounded 42% from a Christmas lull, to hit 274,500 running bales.
The US also sold 92,900 running bales of upland cotton for delivery in 2018-19, which starts in August.
Orders vs shipments
Furthermore, the USDA revealed strong data for shipments too, of 281,600 running bales – the strongest so far of any week in the 2017-18 marketing year.
The pick-up in exports comes amid a longstanding focus on the disparity between bumper export sales and a relatively slow rate of actual shipments, raising concerns that orders may end up being postponed, or cancelled.
Louis Rose at Rose Commodity Group said that “the US is 80% committed and just 26% shipped versus the USDA’s export target” for 2017-18, of 14.8m bales.
Still, shipments have now exceeded export sales for three successive weeks.
The data are particularly significant for investors in coming the day before the USDA unveils its much-watched monthly Wasde report on world crop supply and demand – amid expectations even before Thursday’s data that an upgrade to the 14.8m-bale export estimate.
The consensus expectation is for an upgrade in the export figure to 15.11m bales, according to a Bloomberg poll.
However, with actual US cotton exports still lagging the pace needed to meet the current full-year forecast, Mr Rose urged caution over betting on an upgrade on Friday.
“We do not think that figures put forth in today’s report will prompt the USDA to enhance its export projection within the January Wasde report.
“Shipments will need to average 358,000 running bales per week in order for the [current] target to be realised.”
Mr Rose also urged against getting carried away in driving cotton prices higher on the back of Thursday’s data.
While saying that the “sales figures within today’s report are supportive to bullish for March futures, he noted that the orders being reported “ were mostly accomplished 250–350 points [2.5-3.5 cents a pound] off where the market is currently trading.
“Hence, most of today’s data seems to be priced into the market.”