Increasing movement of Northern Hemisphere crops and ongoing nervousness about a looming resumption of sales from ChinaΆs huge reserve stocks weighed on sentiment.
Cotton futures closed sharply lower Thursday, attributed partly to increasing movement of foreign crops and ongoing nervousness about a looming resumption of sales from ChinaΆs huge reserve stocks.
December closed off 145 points to 76.52 cents, a seven-session low finish after trading from 77.97 to 76.27 cents, and March settled off 113 points to 77.46 cents, just off the low of its 113-point range from 78.50 to 77.37 cents. March has posted lower highs six straight sessions.
Volume slowed to an estimated 38,500 lots from 47,116 lots the previous session when spreads totaled 38,186 lots or 81%, EFP 149 lots and EFS 100 lots. Options volume totaled 6,410 calls and 3,265 puts.
Reports indicated China could begin auctioning reserve cotton in its domestic market any day now at price less than that of the previous sales that ended last summer. Some said the offer price might be roughly equivalent to the price of importing Indian supplies at full duty.
Meanwhile, cotton arrivals in India rose to 2.399 million bales of 170 kilos (1.87 million 480-pounhd bales) as of Nov. 10 from 2.023 million bales (1.58 million) a year ago, according to the Cotton Corp. of India.
The arrivals were about 6.3% of the Cotton Advisory BoardΆs crop estimate of a record 38.1 million bales of 170 kilos or 29.8 million 480-pound bales. India is the worldΆs second largest cotton producer behind China and second largest exporter behind the United States.
The USDA last week left its 2013-14 production forecast for India unchanged from September at 29 million bales. However, revisions raised USDA estimates of the 2012-13 output to 28.5 million bales from 26.5 million and shoved the 2013-14 carryout up to 10.57 million bales.
For the last several years, supply estimates for India have been insufficient to meet utilization, USDAΆs Foreign Agricultural Service said in a circular on world markets and trade.
Stronger data-based export and consumption information had raised concerns about IndiaΆs production and ending stock estimates. So USDA had been using a residual estimate in its balance sheets beginning in 2006-07 to reflect the difference between reported supply and demand.
IndiaΆs Cotton Advisory Board recently provided a higher production estimate for the 2012-13 output and USDA adopted that revision. The USDA also has raised production and ending stock estimates for 2006-07 through 2011-12, eliminating the residual.
Futures open interest dipped 266 lots Wednesday to 173,448, with DecemberΆs down 9,646 lots to 30,233 and MarchΆs up 8,166 lots to 106,185.
Certificated stocks grew 1,829 bales to 192,336. Cotton awaiting review rose to 53,040 bales, including 14,504 bales at Galveston, 3,496 bales at Greenville and 35,040 bales at Memphis.
World values as measured by the Cotlook A Index rose 35 points Thursday morning to 84.90 cents. The index premium to WednesdayΆs futures settlements narrowed 26 points to 6.93 cents over December and two points to 6.31 cents over March.
