A jump to the highest price in a month promptly activated profit-takers to leave cotton futures virtually flat last week.
Benchmark December eased off three ticks for the week ended Thursday to settle at 84.72 cents, while March eked up three points to 84.46 cents. December settled near the middle (84.84) of its five-day range from 83.90 to 85.78 cents, it highest intraday price since Aug. 21.
Cash grower-to-business sales edged up to 2,143 bales on The Seam from 1,976 bales the prior week. Prices averaged 78.77 cents, down from 79.50 cents, while premiums over loan repayment rates rose to 28.33 cents from 25.91 cents. Daily price averages ranged from 77.92 to 79.05 cents.
Cotton futures touched the highs on follow-through buying after the Federal Reserve stunned the markets at midweek by keeping its stimulus program intact. U.S. equities soared to record highs on the news, the dollar index plunged against a basket of currencies and 17 of 19 commodities in the Commodity Research Bureau index were up.
Then stocks retreated slightly, the dollar bounced off a seven-month low and the cotton market fell after hitting resistance at precisely the 50-day moving average but held above the 18-day average the fourth day in a row. DecemberΆs nine-day moving average maintained for a third straight session a crossing over the 18-day average, a positive technical sign.
Forecasts for rain on open cotton in the Delta and Southeast and active harvesting areas of southern Texas generated new concerns about the lateness of and quality of the U.S. crop, already projected a million bales below total use. However, rain forecast for the West Texas Plains would be generally beneficial.
U.S. crop conditions declined during the week ended Sept. 15, USDA said, with good to excellent down two percentage points to 43 percent, fair down a point to 33 percent and poor to very poor up three points to 24 percent.
The DTN cotton condition index slipped to 94 from 99 a week earlier but remained above 82 a year ago. Ratings dipped in Texas, where good-excellent slid two points to 31 percent and poor-very poor rose four points to 34 percent.
Boll opening expanded 12 points to 36 percent, behind 57 percent a year ago and 51 percent on average, while harvesting at 4 percent off the stalk lagged behind the year-ago pace and the average of 6 percent and 8 percent, respectively.
While the September production estimate for Texas held steady at 4.1 million bales, some adjustments took place among crop reporting districts.
The Texas High Plains crop estimate fell 75,000 bales from a month ago to 2.5 million, down from last yearΆs 2.947 million bales, though the projected yield rose to 667 pounds from 608 pounds in 2012-13. Production prospects in the adjoining Rolling Plains climbed 140,000 bales to 855,000 bales, up from 531,000 bales last season.
On the demand scene, net U.S. all-cotton export sales came in below expectations at 111,100 running bales for the week ended Sept. 12, down from the prior weekΆs 150,400 bales.
Upland net sales of 103,100 bales reflected gross sales of 108,600 bales and cancellations of 5,500 bales. Sales went primarily to Turkey, China, Mexico, Vietnam and Thailand.
Shipments slowed to 128,500 running bales from 131,200 bales, with upland exports sliding to 112,900 bales from 123,500 bales. Upland exports were primarily to Mexico, Vietnam, China, Turkey and Indonesia.
To achieve USDAΆs export estimate, sales need to average roughly 135,100 running bales a week and shipments around 198,400 bales.
Talk circulated that Chinese mills have quotas they could use to buy foreign cotton as a result of the 3:1 ratio program under which the government allocates a ton of import quota per 3 tons of cotton purchased from the national reserve.
Preliminary data put ChinaΆs cotton imports in August at 276,000 metric tons (1.28 million 480-pound bales), down from 305,546 tons (1.403 million bales) in August 2012 but higher than 207,028 tons (950,900 bales) in August 2011.
Cotton mill use in China, the worldΆs largest spinner, remained projected in September at 36 million bales by USDA, equal to last seasonΆs consumption and the lowest in a decade.
China has replaced some of its spinning with imported yarn as a result of the government maintaining for 2013-14 a high domestic price floor, keeping domestic prices above world values for raw cotton.
Data available for the last three seasons indicate that cotton yarn imports by China have grown considerably, according to USDA. In 2012-13, ChinaΆs cotton yarn imports reached an equivalent of nearly 8.3 million bales of raw cotton, up 3 million-bale-equivalents from 2011-12 and more than double the amount imported in 2010-11.
The largest yarn suppliers to China during that period included Pakistan, India and Vietnam. Combined, those three countries accounted for 72 percent of ChinaΆs cotton imports during the past two seasons.
As beneficiaries of ChinaΆs demand for yarn imports, India and Pakistan have seen their consumption rise in recent years. Current USDA projections are a record 23 million bales in India and 11.7 million bales in Pakistan, near its record of 12 million in both 2006-07 and 2007-08.
Although Vietnam is a relatively small consumer of cotton, mill use there has grown significantly to a projected 2.5 million bales in 2013-14, up from only 1.6 million bales just three years ago.
Meanwhile, trend-following funds sold a net 6,393 lots to chop their net longs 15 percent to 35,248 lots during the week ended Sept. 10, government data showed. This was the smallest net long position held by those funds since Jan. 15.
Index funds bought 354 lots to nudge their net longs up to 75,172 lots, while traders with non-reportable positions sold 1,418 lots to reduce theirs to 5,254 lots. Commercials bought 7,459 lots, covering 7,235 shorts and adding 224 longs to cut their net shorts to 115,673 lots.
