Cotton futures finished higher on heavy volume Tuesday as traders digested relatively benign monthly supply-demand estimates from USDA.
Spot May led the gains, settling up 62 points to 83.53 cents, just off the high of its 128-point range from down 60 points at 82.31 cents to up 68 points at 83.59 cents. It touched the low below the prior day low ahead of the USDA report and reached the high — 10 points below Monday’s high — in the late going, closing even with the March 15 settlement.
July gained 41 points to close at 83.17 cents, trading within a 104-point range from 82.26 cents to 83.30 cents. December, confined to a narrow 48-point range, finished two ticks off the high at 78.38 cents, up 21 points.
Volume quickened to an estimated 72,800 lots from 68,220 lots the previous session when spreads accounted for 48,461 lots or 71%, EFS 466 lots and EFP 424 lots. Options volume rose to 8,249 lots (5,053 calls and 3,196 puts) from 7,012 lots (5,282 calls and 1,730 puts).
The USDA raised its 2017-18 export estimate 200,000 bales to 15 million, based on the pace of recent sales and shipments, and reduced ending stocks a corresponding amount to 5.3 million bales.
Analysts on average had expected a 350,000-bale increase in exports and a similar decrease in ending stocks. Some have talked of final exports ranging up to a million bales above this USDA forecast.
Production and domestic mill use were unchanged, as mostly expected. The projected carryout would be 28.9% of total use, down from 30.3% foreseen last month but up from 15.1% last season.
Talk has circulated that the crop may come in short of the USDA estimate, based on classing data and slowing receipts, but many analysts hadn’t expected another cut this month ahead of final revisions and the annual ginning report on May 10.
The marketing year price received by producers is projected to average 68 cents per pound, a reduction of a penny from last month and even with the 2016-17 average.
World ending stocks are projected down 560,000 bales from last month to 88.29 million, in line with pre-report estimates. Reductions for Brazil, Sudan, the United States and Australia more than offset an increase for Pakistan.
A 900,000-bale decline in global beginning stocks this month to 86.8 million is expected to lower ending stocks despite a 240,000-bale increase to 122.18 million in world production and a 400,000-bale reduction to 120.39 million in consumption.
The increase in beginning stocks is attributed largely to historical revisions for Brazil and Australia. A 700,000-bale hike to 8.7 million in the Brazilian crop more than offset a decline for Sudan.
Consumption declined as lower mill use in India, Indonesia and some smaller countries more than offset a 100,000-bale increase to 6.55 million in Vietnam, the world’s largest raw cotton importer.
The USDA left its estimates for China and India unchanged. China is the world’s largest cotton consumer and India the largest cotton producer.
Decertification of 2,992 bales at Memphis reduced stocks in deliverable position to 79,345 on Monday. The ICE report initially was delayed to correct the prior-day exchange data. Futures open interest declined 2,502 lots to 275,976, with May’s down 13,876 lots to 72,766, July’s up 8,915 lots to 97,116 and December’s up 2,376 lots to 83,328.