Active spreading and position-rolling — topping over half some daily volumes — amid supportive export data have contributed to a slightly mixed performance in cotton futures.
Spot May eased down 13 points for the week ended Thursday to close at 88.33 cents, holding above its nine-day moving average for a third session but falling back below its 18-day average. July edged up 16 points to 89.97 cents and December gained 57 points to 87.94 cents.
Funds and speculators stepped up rolling longs from the front contract ahead of first notice day for May deliveries 13 trading days ahead. MayΆs settlement discount to July widened to 164 points, widest since late May, 2012. May traded at an intraday premium as wide as 163 points on Jan. 24.
Open interest expanded 2,465 lots from a week earlier to 211,719 coming into ThursdayΆs session, with MayΆs down 17,106 lots to 107,525, JulyΆs up 15,238 lots to 58,899 and DecemberΆs up 3,936 lots to 43,187. Increasing open interest and rising prices indicated longs were being added in July and December.
Then cotton fell amid a widespread commodities selloff on Thursday as corn prices tumbled to a nine-month low and soybeans to a 10-month low. The fiber crop had bucked widespread commodity losses the prior two days.
Cash grower-to-business sales fell to 1,944 bales from 2,876 bales the prior week. Prices advanced 336 points to an average of 84.37 cents, reflecting gains to 32.93 cents from 28.10 cents in premiums over loan repayment rates. Daily price averages ranged from 80.38 to 85.61 cents.
On the demand scene, net U.S. upland export sales during the week ended March 28 of 148,300 running bales for shipment this season rose 4 percent from the previous week but were unchanged from the prior four-week average. Gross sales were 211,600 bales and cancellations were 63,200 bales. All-cotton sales rose to 168,100 RB from 155,600 the week before.
Upland shipments totaled 361,700 bales, up 7 percent from the previous week but down 3 percent from the prior four-week average. Pima shipments hit a crop-year high of 22,400 bales, against the prior weekΆs 20,800, to raise all-cotton exports to 384,100 RB, up from 360,500.
Net upland sales for delivery next season slipped to 59,300 RB from 103,000 the week before and new-crop Pima sales rose to 4,900 bales from net cancellations of 3,800 bales. All-cotton sales for both crop years dipped to 232,300 bales from 254,800 bales.
In a monthly report, the International Cotton Advisory Committee says concerns about a tightening supply-demand balance outside China as Beijing continues to build reserves may be the main factor behind the recent rise in cotton prices.
The ICAC raised its forecast of the season-long price average of world prices as measured by the Cotlook A Index to 90 cents per pound from 87 cents a month ago and projected an average of 118 cents in 2013-14.
The A Index rose to 98.85 cents on March 18, receded to 93.15 cents on March 26, then bounced to 94.80 cents on March 28 and to 95.70 cents Thursday morning. The average last season was 100 cents.
Confidence intervals are 95 percent for price forecasts ranging from 78 to 100 cents for 2012-13 and 95 to 147 cents for 2013-14, ICAC says.
Noting that the United States used to be the largest cotton exporter to China, the ICAC pointed out that U.S. shipments mushroomed from 50,000 metric tons (229,600 480-pound bales) in 2001-02 to 1.3 million tons (5.97 million bales) in 2011-12.
Last season, India overtook the United States, exporting 1.94 million tons (8.91 million bales) to China. However, midway through this season, Australia has surpassed both India and the United States, exporting 578,000 tons (2.655 million bales) to China.
Compared with the corresponding period last season, Brazilian and Uzbek exports to China remained stable at 284,500 tons (1.31 million bales) and 189,000 tons (868,100 bales), respectively.
For the past five seasons, African countries contributed on average 10 percent of total exports to China. Last season, Africa exported 482,700 tons (2.22 million bales) to China. The top three exporting countries were Burkina Faso, Cameroon and Benin.
During the first seven months of the current season, Mali, Zambia and Zimbabwe already have exported a total of 125,000 tons (574,115 bales) to China, the ICAC report said.
Elsewhere, the Cotton Corp. of India has asked the director of Foreign Trade for permission to offer for export a million bales (of 170 kilos or 375 pounds) — roughly half the stocks it has accumulated — as part of its price support operations, media sources said.
By contrast, the textiles industry has urged the government to release all its cotton stocks to domestic mills. India remains the worldΆs second-largest cotton producer, consumer and exporter.
However, IndiaΆs 2012-13 exports of 5.5 million bales, as estimated by USDA, are expected to fall 50 percent from the previous year, nearly halving the countryΆs share of world exports from the 2011-12 record of 24 percent. The sharp decline is because of lower supplies and higher domestic consumption.
Meanwhile, trend-following funds sold 6,815 lots in futures-options combined during the week ended March 26 to reduce their net long position by 8.3 percent to 74,936 lots, according to the Commodity Futures Trading Commission.
These funds had increased their net longs four weeks in a row to the largest since the record high on Feb. 28, 2008. Index funds bought a net 416 lots to hike their net longs to 71,124, while small traders sold a net 934 lots to cut theirs to 15,038 lots.
Commercials bought a net 7,333 lots — they covered 9,705 shorts and liquidated 2,372 longs — to shave their net shorts to 161,097 lots. In futures only, non-commercials trimmed their net longs by 1.2 percentage points to 37.7 percent of the open interest.
