U.S. ending stocks expected to rebound next season and world stocks to grow to a new all-time high. New estimate projected ChinaΆs cotton area down 12.6%.
Cotton futures fell to a six-session low close in July as its old-crop premium to December narrowed in slow dealings Tuesday.
Most-active July settled off 77 points to 93.98 cents, its lowest close since April 28 and the lower quarter of its 97-point range from down a point at 94.74 to down 98 points at 93.77 cents. Maturing May, where trading expires Wednesday, closed down 92 points at 93.70 cents.
December settled off 41 points at 84.12 cents, trading within a 68-point span from up five points at 84.58 to down 63 points at 83.90 cents. It finished an inside day, trading within the previous-session range.
Volume totaled an estimated 12,240 lots, against 12,860 lots the previous session. Options volume totaled 1,815 calls and 2,502 puts.
U.S. ending stocks are expected to rebound next season to a median 3.87 million bales from 2.5 million bales forecast for 2013-14, according to a survey by Reuters of traders, analysts and cooperatives. This seasonΆs stocks currently are forecast at the lowest since 1990-91.
Production is projected at 15.1 million bales, up from 12.87 million this season, while exports are expected to fall to 10.25 million bales from 10.7 million. Domestic mill use is pegged at 3.7 million bales, up 100,000 bales from 2013-14.
World ending stocks are seen growing to a new all-time high of 99.9 million bales from 96.92 million, with production of 115.5 million bales still outpacing consumption of 112.75 million bales. The latest USDA estimates put 2013-14 production at 116.62 million bales and consumption at 109.45 million.
Global stocks, estimated up 8% this season from 2012-13, have risen dramatically the last several years as cotton prices have encouraged higher world production that has exceeded mill use. The USDAΆs April estimates indicated world stocks will have increased this season by nearly 50 million bales since 2009-10, an unprecedented growth.
Policies in China are the major driver of the global stocks buildup, USDA analysts have pointed out. The carryover in China this season is projected at a record 58.8 million bales, the third consecutive season of rising stocks.
With stocks in the United States declining and those in the rest of the world about unchanged, China is forecast to hold a record 61% of global stocks at the end of this season. However, uncertainties about the retention, disposal and quality of those stocks have supported world cotton prices as free supplies have declined in recent marketing years.
The USDAΆs World Agricultural Outlook board will issue its first official 2014-15 supply-demand forecasts on Friday and update its 2013-14 estimates. Final U.S. 2013 crop revisions on acreage, yield and production will be issued by the National Agricultural Statistics Service.
Meanwhile, a new estimate by the China Cotton Association has projected the planted area at 4.08 million hectares (one hectare equals 2.471 acres), down 12.6% from last year.
Futures open interest expanded 3,690 lots Monday to 193,300, with MayΆs down 58 lots to 421, JulyΆs up 818 lots to 122,299 and DecemberΆs up 2,765 lots to 63,626. Certificated stocks grew 9,445 bales to 344,064. Awaiting review were 5,966 bales.
World values as measured by the Cotlook A Index gained 50 points Tuesday morning to 95.80 cents. The premium to MondayΆs July futures settlement narrowed five points to 1.05 cents.
Forward A Index values for 2014-15 gained 100 points to 92.75 cents, narrowing the discount to the 2013-14 index by 50 points to 3.05 cents and the premium to MondayΆs December futures settlement by 15 points to 8.22 cents.
