A strong overnight rally at midweek lacked follow-through, but it provided impetus for a little changed cotton futures finish, basis most-active March, prior to first notice day for December deliveries last week.
March eked up 15 points from its close on Friday, Nov. 15, to settle Thursday at 78.35 cents. It finished with the biggest two-day gain, 79 points, since Oct. 3 and posted back-to-back closes back above its declining nine-day moving average. Yet it closed just shy of midrange.
December shed 233 points to settle at a new low close for the move at 74.79 cents. It closed lower four consecutive sessions and settled near the low for the period of 74.50, the lowest intraday price on the weekly chart since early November 2012.
Liquidation and rolling of December positions continued ahead of first notice day on Friday, Nov. 22. The December-March spread traded as wide as 385 points carry, widest in the life of the contracts.
Cash grower-to-business sales climbed to a crop-year high of 39,281 bales on The Seam from 34,221 bales the previous week. Prices fell to an average of 73.21 cents from 76.24 cents, reflecting a decline to 19.95 cents from 22.11 cents in premiums over loan repayment rates. Daily price averages ranged from 71.75 to 74.22 cents.
Reports that ChinaΆs crop could fall to 6.68 million metric tons or 30.68 million 480-pound bales helped lift March at midweek to the high of 79.45 cents, snapping a string of nine lower daily highs in a row.
This estimate is 1.82 million bales below USDAΆs November projection. The USDA cut its estimated 500,000 bales from September and has pegged ChinaΆs 2012-13 output at 35 million bales.
The new internal estimate was commissioned by the China National Cotton Reserves Corp. Early frost, rain and snow were said to have reduced yields in northern Xinjiang, the countryΆs top cotton-producing region, by 20 percent. Quality also has been adversely affected.
Lower yields, rising production costs and uncertainty about ChinaΆs cotton policy prompted reports that growers in some areas may switch land from cotton to grains next year.
About 88 percent of the countryΆs expected production had been harvested by the end of October and about 57 percent had been sold, according to the China Cotton Association.
ChinaΆs purchases of the 2013 crop were reported to have reached 2.16 million tons, or 9.92 million bales, by Nov. 15, down about 16 percent from procurements through the corresponding period last season. Reserve stocks subsequently were estimated at 9.712 million tons or 44.61 million bales.
The smaller crop contributed to the reduced stockpile purchases, the CNCRC said. No announcement was made on a resumption of stockpile sales, and speculation arose that the sales might be delayed or suspended.
Traders had appeared preoccupied with ongoing talk of an impending announcement on the reserve sales from ChinaΆs huge stockpile to its domestic market and with the approach of first notice day for December.
Analysts expected the Chinese sales to feature a base price somewhere around the equivalent of 133 cents a pound on an unknown quantity of old-crop cotton of possibly questionable quality.
Unanswered questions, observers say, include whether mills would prefer the old-crop domestic stocks or current-crop Indian or other foreign cotton at what arithmetically still could be a discount at prevailing world values even with the 40 percent import tax.
The complex math would suggest a competitive futures price compatible with U.S. landed cotton would be roughly in the low 70s, others say.
U.S. all-cotton export commitments for shipment this season reached 6.116 million running bales on healthy sales of 331,300 bales during the week ended Nov. 14, against the prior weekΆs crop-year high 505,200 bales.
Upland sales dipped to 305,100 bales from 472,700 bales, with 117,600 bales sold to Turkey, 46,000 to China and 36,600 to Thailand. Gross upland sales were 310,900 bales and cancellations were 5,700 bales.
Commitments stand at 61 percent of the USDA export forecast, compared with 57 percent of final 2012-13 shipments at the corresponding point last season. The gap behind commitments a year ago widened to 1.085 million bales or 15 percent.
Exports for the season rose to 2.032 million running bales on slow weekly shipments of 98,300 bales. The total lagged 266,000 bales, or 12 percent, behind year-ago shipments but amounted to 20 percent of the USDA forecast, against 18 percent final exports a year ago.
To achieve the USDA estimate, shipments need to average roughly 233,800 running bales a week and sales approximately 110,400 RB.
On the crop scene, U.S. cotton harvesting advanced 12 percentage points to 68 percent complete during the week ended Nov. 17, USDA said, 14 points behind last year and seven points behind the five-year average.
Harvesting progressed 12 points to 60 percent complete in Texas and 15 points to 62 percent in Georgia. The harvest lagged a year ago by 19 points and the average by seven points in Texas and by nine points and eight points,
respectively, in Georgia.
No national crop ratings were reported for the 32 percent still on the stalk. In top-producing Texas, conditions declined, slipping a point to 29 percent good to excellent, falling two points to 39 percent fair and rising three points to 32 percent poor to very poor.
Meanwhile, trend-following funds flipped to net short in futures-options combined during the week ended Nov. 12 for the first time since Nov. 27, 2012, government data showed.
They sold 4,159 lots to reverse to net short 4,031 lots from net long 128 lots. Index funds bought 2,979 lots to boost their net longs to 64,443 lots, while traders with non-reportable positions bought a net 1,062 lots to shave their net shorts to 4,319 lots.
Commercials bought a net 119 lots, covering 33,740 shorts and liquidating nearly as many longs — 33,621 — to trim their net shorts to 56,093 lots.
