Slower U.S. weekly export sales again generally expected. United States, Brazil and Australia forecast to attain 60% of world cotton trade. Rising trade outlook attributed to above-average growth in world cotton mill use.
Cotton futures settled higher Wednesday, with March touching the session high in the late going after hitting the low in the early minutes of overnight trading.
March gained 68 points to close at 75.71 cents, trading within a 100-point range from 74.95 to just above the prior-day high to 75.95 cents. May rose 79 points to settle at 76.12 cents, trading within a 99-point range from 75.29 to 76.28 cents.
The other contracts finished up 83 to down 25 points, with December 2018 up 48 points to 73.09, a tick off its contract high.
Volume dipped to an estimated 22,878 lots from 26,553 lots the prior session when spreads accounted for 10,315 lots or 39%, EFS 1,058 lots and EFP 22 lots. Options volume slipped to 4,364 lots (2,349 calls and 2,015 puts) from 5,654 lots (3,880 calls and 1,774 puts).
The market rose in the face of slower sales again generally expected in USDA’s U.S. weekly export sales report set for release at 7:30 a.m. CST on Thursday. Prices that week ended Dec. 14 traded from 72.76 to 75.56 cents, basis spot March, and ended with a 110-point gain to 75.33 cents.
Net upland sales remained strong the prior reporting week at 305,800 running bales for both marketing years, including a larger-than-expected 259,700 RB for shipment this season. Upland shipments slowed to 166,600 RB, though outstanding sales were a hefty 7.489 million RB.
Upland sales the last four weeks have averaged 269,900 RB, well above the pace needed to match this month’s USDA export forecast. Upland shipments have continued to lag at a four-week average of 152,800 RB amid warehouse congestion and difficulties in matching qualities against sales.
The USDA export forecast of 14.8 million statistical 480-pound bales is the third largest on record, behind 17.67 million bales in 2005-06 and 14.92 million bales last season. Exports from Brazil and Australia are expected to increase as they harvest high quality crops.
Those three countries are projected to attain a combined 60% of global cotton trade. In contrast, cotton exports from India and Uzbekistan are forecast to decline again in 2017-18.
World cotton trade is forecast to expand 3% from last season and reach a four-year high at 38.5 million bales, up 1.2 million bales from last season but 17% below the record of 46.5 million bales in 2012-13.
The rising trade outlook is attributed to above-average growth expected in world cotton mill use this season. World cotton consumption is projected to expand 4% to 119.6 million bales, the largest year-to-year growth since 2009-10 when mill use rose over 8%.
Improvement in the global economic outlook and a more favorable price against synthetics are responsible for the largest global cotton consumption estimate in a decade, USDA says.
Most of the world’s primary cotton spinners rely on imports, and the leading 2017-18 importers are considered nonproducing countries. As a result, import demand is satisfied by producing-exporting countries.
The U.S. share of world trade is projected by USDA at relatively strong 38.5% but below last season’s 40%.
Futures open interest dropped 767 lots to 265,088 on Tuesday, with March’s down 930 lots to 169,088 and May’s down 487 lots to 49,286. Certified stocks remained at 47,268 bales, unchanged since Dec. 4.
Source: Agfax