July premium to December fell to lowest since January. May expired 71 points under July. IndiaΆs 2013-14 exports projected higher.
Cotton futures plunged in a heartbeat to the session low in July in early dealings and remained under pressure the rest of the day Wednesday.
Most-active July settled off 143 points to 92.55 cents, its lowest close since April 28 and the lower reaches of its 190-point range from up 19 points at 94.17 to down 171 points at 92.27 cents. Its straddle premium to December fell to a low of 804 points, lowest since January.
May expired at 91.84 cents, down 186 points and 71 points under July. It had swung from an inversion up to 221 points on March 13 to carry as wide as 262 points on April 22.
December settled off 21 points to 83.91 cents, in the lower half of its 83-point range from 83.61 to 84.44 cents.
Profit-taking ahead of an expected weak U.S. export sales report on Thursday for the week ended May 1 and the USDA supply-demand report on Friday slammed July. Talk has circulated that fresh business this week also has been lacking.
Volume quickened to an estimated 18,500 lots from 12,240 lots the previous session when spreads totaled 4,908 lots or 40%, EFS 75 lots and EFP 13 lots. Options volume totaled 3,554 calls and 3,460 puts.
IndiaΆs cotton exports appear to have defied expectations during April, lifting 2013-14 shipments for the season to nearly 8 million 480-pound bales, according to a U.S. agricultural attache report.
As a result, exports now are expected to climb to 8.8 million bales before the marketing year ends in three months. This is up 10% from USDAΆs April estimate and solidifies IndiaΆs position as the worldΆs second largest cotton exporter behind the United States.
Indian cotton has remained competitively priced, the report said, and buyers were reported seeking lower-quality, lower-priced cotton. Weather conditions have stimulated additional cotton pickings — as many as five in some areas — and, while supplies are up, quality reportedly is down.
Bangladesh, China, Turkey and Vietnam have all been active buyers of late, the report said, while exports to Pakistan have slowed considerably. Exporters were optimistic that exports also will be sizable during May.
Winter rains facilitated additional pickings following a strong monsoon, resulting in the post raising its 2013-14 production estimate by 500,000 bales from USDAΆs April projection to 29.5 million.
Cotton is harvested by hand in India and farmers in some areas obtain multiple pickings. If weather conditions are suitable, farmers will leave cotton plants in the field for several months.
Looking ahead, the post projected 2014-15 exports to fall to 6 million bales, production to decline to 28 million bales and domestic use to rise by 500,000 bales from 2013-14 to 23.5 million.
The post projected 2013-14 ending stocks at 9.22 million bales, a million bales below the USDA estimate last month, and forecast a decline to 8.72 million bales for 2014-15.
Futures open interest expanded 2,128 lots Tuesday to 195,428, largest since early November 2013, with MayΆs down 26 lots to 395, JulyΆs up 861 lots to 123,160 and DecemberΆs down 1,074 lots to 64,700.
Certificated stocks continued to grow, rising 9,678 bales to 353,742, largest since July 2013. Awaiting review were 6,376 bales for a possible total of 460,118 bales.
World values as measured by the Cotlook A Index dropped 60 points Wednesday morning to 95.20 cents. The premium to TuesdayΆs July futures settlement widened 17 points to 1.22 cents.
The Forward A Index for 2014-15 fell 145 points to 91.30 cents, widening the discount to the 2013-14 index by 85 points to 3.90 cents and narrowing the premium to TuesdayΆs December futures close by 104 point to 7.18 cents.