Strong U.S. weekly export sales expected. Pre-report estimates see an increase in U.S. exports in the USDA supply-demand forecasts and a cut in world ending stocks. May’s open interest topped March’s.
Cotton futures finished on small old-crop losses and mostly slight new-crop gains on heavy volume Wednesday as traders awaited USDA reports on U.S. weekly export sales and monthly supply-demand estimates.
March settled down 23 points to 75.96 cents, another new low since Dec. 20 and near the low of its 111-point range from up 74 points at 76.93 to down 37 points at 75.82 cents. It traded on both sides of Tuesday’s range.
May closed off nine points to 77.29 cents, also near the low of its 95-point range from 78.16 to 77.21 cents, and July eased six points to 78.31 cents. The other contracts finished flat to up 21 points, with December up 16 points to 75.03 cents.
Volume jumped to an estimated 81,000 lots from 62,174 lots the prior session when spreads accounted for 42,652 lots or 69%, EFP 430 lots and EFS 75 lots. Options volume slowed to 6,527 lots (3,511 calls and 3,016 puts) from 16,090 lots (7,156 calls and 8,934 puts).
Strong U.S. export sales generally are expected for the week ended Feb. 1 in the USDA report set for release at 7:30 a.m. CST on Thursday. Prices that week ranged from 80.32 to 77.16 cents and ended with a loss for the period of 353 points to 78.35 cents, basis March.
Net upland sales the prior week of 303,300 running bales for shipment this season notched a six-week high and were up 50% from the prior four-week average. Sales for the four weeks ended Jan. 25 averaged 230,200 RB, well above pace needed to match the USDA export forecast.
However, shipments have consistently lagged the pace required to reach the USDA projection, though upland exports for the week ended Jan. 25 hit a marketing year high of 305,100 RB. Shipments the last four weeks averaged 277,300 RB, up from 253,100 RB the prior four weeks.
Noting that weekly export commitments showed significant cancellations in early January, predominantly for China, Cotton Outlook said in a monthly review that domestic prices on that market have continued to move downward in the face of a bumper crop in the major growing region Xinjiang.
Additional supplies also will become available in March when this year’s auctions of government-owned stocks are scheduled to begin.
The strong recent rally in international prices and declining domestic values have diminished some of the price advantage typically associated with import purchases, Cotton Outlook said.
“Apart from a short-lived spike in demand, presumably to cover immediate requirements ahead of the auction series, mills in receipt of 2018 import quota have approached international purchases with caution,” it added.
Meanwhile, pre-report estimates indicate USDA is expected to increase the 2017-18 export forecast by 100,000 to 150,000 bales from last month’s 14.8 million in the supply-demand report scheduled for release at 11 a.m. CST on Thursday. Exports last season were 14.92 million bales.
Ending stocks are projected around 5.6 million bales, down from the January forecast of 5.7 million but up from last year’s carryout of 2.75 million bales. The crop estimate is mostly expected to be carried forward ahead of the end-of-season ginning data on March 8.
Globally, ending stocks are seen around 87.4 million bales, down from 87.79 million projected last month and 87.64 million last year. World production is expected to be shaved from last month’s 120.97 million bales, mainly on an additional cut from 29.3 million bales in India.
Futures open interest fell 4,613 lots to 293,564 on Tuesday, with March’s down 8,569 lots to 97,565 and May’s up 908 lots to 97,992. This marked the first time that May’s open interest topped March’s.
Certified stocks grew 2,741 bales to 75,757. There were 2,802 newly certified bales and 61 bales decertified. The additions included 200 bales at Dallas-Fort Worth, 1,702 bales at Galveston and 900 bales at Memphis. The decertification was at Galveston.Source: Agfax