A new set of bearish supply-demand forecasts, reinforced by negative technical signals, drove cotton futures to nearly a one-month low last week.
Benchmark December lost 246 points for the week ended Thursday to close at 73.53 cents. It broke below a trend-line in place since June and finished in the lower quarter of the five-session 455-point range from 77 cents to 72.75 cents, the lowest intraday print since Aug. 17.
Sell-stops were triggered on the way down, taking out the low of the 74.60-77.49 range that had not been violated since the 289-point span was posted on Aug. 21. Some commercial buying was seen on the retreat.
Cash trading slowed to 5,118 bales from 6,341 bales the previous week on The SeamΆs grower-to-business exchange. Prices averaged 69.09 cents, up from 67.76 cents, reflecting a 111-point decline to 15.64 cents in premiums over loan repayment rates. Daily price averages ranged from 64.16 to 71.32 cents.
The market trimmed losses amid support from outside forces and strong U.S. all-cotton weekly export sales of 338,400 running bales reported for the week ended Sept. 6, up from 114,000 bales the previous week. China booked a surprising 281,500 bales, 83 percent of the all-cotton total.
Export commitments for 2012-13 totaled 5.019 million running bales, 1.596 million behind a year ago. Rolling of unshipped sales from the prior crop year hit a record high coming into 2011-12 after the dramatic run-up in cotton prices in late 2010 and early 2011 prompted unprecedented forward export contracting. Many of those sales later were canceled.
Shipments fell to 128,200 bales from 226,500 bales. This brought exports for the season to 863,700 bales, up 220,200 bales from a year ago. Exports stand at nearly 8 percent of the new export estimate, compared with 6 percent of final shipments at the corresponding point last year.
The market ended the period with a modest daily gain when equities surged on Wall Street and the dollar weakened after the Federal Reserve announced an open-ended bond purchase program that some analysts said was stronger than expected.
Tight availability of “free” old-crop supplies ahead of volume movement of new-crop cotton continued to offer support, similar to the situation following bearish August supply-demand estimates.
World ending stocks for 2012-13 jumped 1.85 million bales or 2.48 percent from a month ago to a new all-time high of 76.52 million, mainly reflecting a 2.08-million-bale-increase to 69.88 million in beginning stocks. Production eased down a marginal 80,000 bales to 114.03 million and consumption fell 610,000 bales to 107.55 million.
The world stocks-to-use ratio climbed to a whopping 71.15 percent from 69.04 percent projected last month and 66.67 percent last season.
Global stocks rose for the third consecutive season, partly because record recent cotton prices encouraged production but reduced demand. China accounted for about 72 percent of the stocks increase from August.
Stocks outside China increased 520,000 bales or 1.29 percent to 41.01 million. This represents 58.97 percent of mill use outside China, against 58.55 percent a month ago and 58.92 percent in 2011-12.
A 200,000-bale reduction from a month ago to 5.3 million in U.S. ending stocks reflected slightly lower production and exports. The stocks-to-use ratio eased to 34.87 percent from 35.49 percent. Beginning stocks gained a slight 50,000 bales on a revision in the 2011-12 carryout.
Crop prospects fell 542,000 bales on the month to 17.109 million, mainly on reductions of 600,000 bales to 6.1 million in Texas and 150,000 bales to 950,000 in Mississippi. Partially offsetting were increases in the Southeast, including 100,000 bales each to 2.5 million in Georgia and to 1.050 million in North Carolina.
Exports declined 2.5 percent to 11.8 million bales because of a smaller crop and a reduction in world imports but still are up 90,000 bales from last season. Domestic mill use, as expected, was unchanged at 3.4 million bales, up 100,000 bales from 2011-12.
The USDA pared its estimate of the planted area by 280,000 acres to 12.36 million and trimmed its estimate of acres for harvest by 370,000 to 10.44 million for an abandonment of 1.92 million acres or 15.54 percent.
Yields of all cotton are forecast at 786 pounds, up two pounds from the August estimate but 31 pounds below the five-year average.
The production estimate included reductions of 536,000 bales to 16.452 million for the upland crop and 6,000 bales to 657,000 for Pima.
Regionally, upland estimates increased only in the Southeast, rising by 315,000 bales to 5.085 million, while declining 165,000 bales to 3.8 million in the Mid-South, 661,000 bales to 6.317 million in the Southwest and 25,000 bales to 1.25 million in the West.
New district estimates for Texas wonΆt be made until October. Planted acres in Texas were revised down 200,000 to 6.6 million and acres for harvest dropped 300,000 to 4.9 million, an abandonment of 1.7 million or 25.8 percent. Yields fell 20 pounds to 598, down 102 pounds from the five-year average.
The USDA narrowed the projected average farm price range for the season a cent on each end to 61 to 78 cents. This left the midpoint at 70 cents, against 88.50 cents last season.
U.S. crop ratings deteriorated during the week ended Sept. 9, with good to excellent down a percentage point to 41 percent, fair also down a point to 29 percent and poor to very poor up two points to 30 percent.
Cotton rated good to excellent remained 10 points below the 10-year average but was 13 points above the drought-devastated crop a year ago. About 4 percent was off the stalk, compared with 6 percent a year ago and the five-year average of 5 percent.
U.S. cotton classing totaled 547,823 bales through Sept. 6, down from 905,871 bales a year ago. Tenderable cotton accounted for only 47.4 percent, compared with 59 percent last season.
