A bigger-than-expected cut in U.S. ending stocks apparently suppressed a boost to a new all-time high in world stocks as cotton futures advanced last week even also in the face of sales from ChinaΆs huge stockpile.
Spot March gained 258 points as spreads narrowed to finish the week ended Thursday at 77.78 cents, its highest close since Aug. 31 after it posted its highest intraday print (78.18) by 16 points since mid-May.
May rose 215 points to settle at 78.19 cents, July added 174 points to 78.86 cents and December edged up 20 points to 79.29.
Sales from ChinaΆs reserves began Monday with still no mention of an import quota. Early offerings of old-crop cotton of mostly of lower qualities met a sluggish mill response, analysts said. This was seen as implying continuing import demand despite big import fees and taxes.
So instead of crushing import demand as many feared, the sales and higher-trending Chinese prices offered near-term support to futures. By stifling its export-oriented textile industry with prohibitively high prices, a trade analyst says, China has allowed textile output to shift to other countries, leading to higher mill use in many markets.
Cash grower-to-business sales jumped to 88,939 bales on The Seam from 29,980 the prior week. Prices rose 202 points to an average of 69.04 cents, reflecting a 96-point gain to 16.73 cents in premiums over loan repayment rates. Daily price averages ranged from 67.03 to 70.70 cents.
Support stemmed partly from strong net U.S. all-cotton export sales of 367,700 running bales during the week ended Jan. 10, with upland sales of 339,999 bales up 73 percent from the previous week and 36 percent from the prior four-week average. This raised 2012-13 commitments to 9.659 million bales, 82 percent of the upwardly revised USDA export forecast.
All-cotton shipments climbed to a marketing year high of 337,400 bales, lifting exports for the season to 4.009 million, 761,000 bales ahead of exports a year ago. Shipments have reached 34 percent of the forecast, compared with 29 percent of final exports at the corresponding point last season.
In its January supply-demand report, USDA cut its estimate of the U.S. carryout by 11.1 percent from a month ago and raised its projection of world ending stocks by 2.6 percent.
U.S. production fell 250,000 bales to 17.01 million, with a 500,000-bale reduction to 5 million in Texas — because of larger estimated abandonment — partially offset by increases in other states.
Estimated planted area dipped 40,000 acres on the month to 12.32 million and abandonment jumped 1.01 million acres to 9.43 million. This reflected abandonment of 2.89 million acres or 23.5 percent. Yields rose 73 pounds to 866, up from the five-year average of 817 pounds. The record stands at 879 pounds in 2007.
The export projection topped expectations, rising 400,000 bales to 12.2 million. This reflected larger import demand by China and supportive data on U.S. export sales to date, USDA said. Domestic mill use was unchanged at 3.4 million bales.
Ending stocks are expected to fall 600,000 bales to 4.8 million, still up from 3.35 million bales a year earlier. The stocks-to-use ratio is estimated at a healthy 30.8 percent, down from the December estimate of 35.5 percent but up from 22.3 percent in 2011-12.
The USDA raised its forecast of the 2012-13 average farm price by a cent on the lower end to a range of 66 to 71 cents, nudging the midpoint up 50 points to 68.50 cents, down from 88.30 cents in 2011-12.
Globally, USDA shaved beginning stocks by 333,000 bales to 68.85 million, boosted production by 1.93 million bales to 118.83 million, cut consumption by 420,000 bales to 106.06 million and hiked ending stocks by 2.08 million bales to 81.72 million. Consumption fell mainly on a 500,000-bale reduction to 21.5 million for India.
The world stocks-to-use ratio is estimated at 77.05 percent, up from 74.8 percent projected in December and 66.8 percent last season. This also is a record high.
ChinaΆs ending stocks rose by 3 million bales on the month to 40.61 million, 49.7 percent of the world carryout. Stocks in the rest of the world outside China fell 920,000 bales to 41.11 million.
Production climbed 2 million bales to 33.5 million in China, where USDA said recent levels of classing and purchases for the national reserve indicate the crop is larger than previously estimated.
A million-bale-increase to 12.5 million in ChinaΆs imports boosted world trade, projected up 1.2 million bales to 38.9 million, and exports were raised for India, the United States, Brazil and Australia.
ChinaΆs imports are forecast higher because of strong imports to date and tight free stocks resulting from the large accumulation of cotton in the national reserve, USDA said.
The U.S. production estimate included 16.250 million bales of upland, down 350,000 bales from the December forecast, and 760,000 bales of Pima, up 103,000 bales.
Regionally, upland production gains of 135,000 bales to 5.67 million in the Southeast and 40,000 bales to 4.18 million in the Mid-South were more than offset by declines of 500,000 bales to 5.205 million in the Southwest and 25,000 bales to 1.195 million in the West.
District estimates put the Texas High Plains output at 2.92 million bales, down 485,000 bales from the December forecast. This was up 59 percent from the drought-stricken 2011 crop but the second lowest since 1992. Growers cut plantings 8 percent from the 2011 acreage to 4.22 million acres and abandoned 1.9 million acres or 45 percent.
Yields averaged 604 pounds per harvested acre, up from 567 pounds the previous year but down from the five-year average of 733 pounds.
Production in the adjoining Rolling Plains totaled 510,000 bales, up from 175,000 bales the previous year, off 620,000 harvested acres and 1.15 million planted acres.
