Removal of IndiaΆs cotton export ban, though not totally unexpected and greeted with some skepticism, weighed on cotton futures last week.
Benchmark July fell to an intraday 10-session low to 87.87 cents on the heels of the announcement on Monday and — though it didnΆt again test that mark — lost 290 points for the week ended Thursday to close at 89.21 cents. December shed 251 points to settle at 86.52 cents after hitting a new calendar year low of 85.40 cents.
Cash grower-to-business trading dwindled to 645 bales on The Seam. This was down from 14,237 bales the previous week and the smallest grower sales since the week ended Sept. 22. Prices averaged 76.86 cents, down from 80.56 cents the week before. Premiums over loan redemption rates fell 296 points to 26.17 cents.
A ministerial panel lifted IndiaΆs nearly 2-month-old restriction on cotton exports because new estimates indicated a sizable increase in ending stocks. The panel will review the situation in two to three weeks. IndiaΆs export reliability has been damaged by a series of on-and-off adjustments to its export policy.
The Indian ministers also asked the state-run Cotton Corp. to maintain a buffer stock of 1 million bales (170 kilos) between June and August to supply local textile mills in the event of a shortfall.
Major differences in USDAΆs 2011-12 estimates for India and revisions by IndiaΆs Cotton Advisory Board have raised big implications for USDAΆs updated supply-demand report to be released on Thursday.
The USDA also will release its final tweaking of U.S. acreage, yield and production estimates for 2011-12 along with its first official U.S. and world supply-demand forecasts for 2012-13.
The market hardly budged when USDA reported U.S. 2011-12 net export sales cancellations of 14,200 running bales for the week ended April 26, a few days before India announced it was lifting the export ban. This left commitments at 11.601 million running bales, still about 5 percent above the USDA forecast.
Net new-crop sales of 79,200 running bales lifted 2012-13 commitments to 1.108 million for the marketing year beginning Aug. 1.
Robust shipments of 336,400 running bales boosted exports for the season to 8.094 million, about 73 percent of the USDA forecast. With 13 weeks left in the crop year, shipments need to average roughly 228,000 running bales a week to achieve the USDA estimate.
Talk that China may issue additional import quotas totaling a million metric tons (4.59 million 480-pound bales) this month to help textile mills may have contributed to futures support. Mills would welcome the relatively less expensive foreign cotton.
The government is reported likely to issue the supplemental quota now that farmers have made planting decisions. Beijing has worried that increased cotton imports would pressure domestic cotton prices and hurt farmersΆ willingness to plant cotton.
Only a small amount of the existing quota is believed still unused. There have been reports of big premiums over international prices being paid to acquire import quotas.
Internal Chinese prices have remained far above international values. The China Cotton Index at midweek stood at 19,332 yuan per metric ton or the equivalent of 139.30 cents per pound. World values as measured by the Cotlook A Index were 97.95 on Thursday, against 99.60 cents a week ago.
China could release some of its huge reserve stocks in conjunction with or apart from a new import quota. A supplemental quota could spur covering of short hedges against a slew of consignment stocks held at Chinese warehouses and would come at a time when mills around the globe are not well covered, some trade analysts say.
On the U.S. crop scene, cotton planting advanced to 26 percent completed as of April 29, compared with an upwardly revised 18 percent a week earlier, 16 percent a year ago and 19 percent on average.
Planting progressed a slowed two percentage points in Texas to 25 percent done, 10 points ahead of last year and five points ahead of average, and 11 points to 23 percent completed in Georgia, up from 13 percent a year ago and 9 percent on average.
Beneficial rains in parts of the Texas High Plains were particularly timely, coming just ahead of the opening of the traditional optimum cotton planting period on May 5.
The heaviest amounts recorded by the Texas Tech West Texas Mesonet included 2.28 inches at Southland and 1.02 inches at Graham, both in Garza County; 1.61 inches at Anton and 1.40 inches near Levelland, both in Hockley County; and 1.10 to 1.95 inches at several Lubbock County sites, though the official amount measured only 0.14-inch.
Much broader planting rain coverage still was needed. No rain fell at Lamesa in Dawson County, a prime dryland cotton area, and rainfall generally was highly variable within relatively confined areas, as indicated by the readings in Lubbock County.
Globally, cotton area is expected to decrease by 7 percent to 33.6 million hectares (83.03 million acres) in 2012-13 in response to lower prices, improving attractiveness of grains and soybeans and rising production costs, says the International Cotton Advisory Committee.
Based on average yields, world output could decline by 7 percent to 25.25 million metric tons (115.97 million 480-pound bales), the ICAC said.
After two seasons of decline, global cotton mill use is projected to increase by 4 percent to 24.05 million tons (110.46 million bales), lifted by economic growth and lower cotton prices, the secretariat said.
With production again exceeding consumption, global stocks are expected to continue increasing. The carryout is projected up 9 percent to 14.3 million tons or 59 percent of world mill use, up from 56 percent estimated for 2011-12.
The projected accumulation of stocks will weigh on international prices in 2012-13, ICAC said, adding that the extent of the pressure will depend in large part on how the Chinese national reserve is handled.
