World cotton production now projected to exceed consumption by 8.59 million bales, ICAC says. Forecast for world prices held steady.
Cotton futures went nowhere Tuesday, trading within a tiny price span and finishing little changed near midrange in thin dealings.
Most-active March settled off a single tick at 78.61 cents, moving within only a 50-point range from up 27 points at 78.89 to down 23 points at 78.39 cents. The May contract edged up five points to 79.14 cents.
Volume slowed to an estimated 10,100 lots from 13,407 lots the previous session when spreads accounted for 2,916 lots or 22% and EFP for 50 lots. Options volume totaled 4,676 calls and 2,128 puts.
World production is expected to outpace consumption by 8.59 million bales this season, down from 9.41 million foreseen a month ago, according to the latest International Cotton Advisory Committee estimates converted to 480-pound bales from metric tons.
In its December supply-demand estimates, the ICAC shaved 2013-14 world ending stocks to still a record high 93.33 million bales from 95.35 million projected last month.
The ICAC pared its production forecast to 117.76 million bales from 118.17 million and raised its consumption forecast to 109.17 million bales from 108.76 million. Production is estimated down nearly 5% from last season and consumption up about 2%.
The projected world carryout remains at an all-time high of 85.5% of consumption, though down from 87.7% foreseen last month. The global cotton trade estimate dipped 680,000 bales to 38.77 million.
World prices as measured by the Cotlook A Index are forecast by ICAC at a 2013-14 average of 88 cents. This is unchanged from the November forecast and also from the 2013-14 average.
China, whose reserve and import policies are major world price factors, started selling 2011-crop cotton from its stockpile on Nov. 28 at 18,000 yuan per ton or 133 cents a pound for standard grade at current exchange rates.
Although China announced no overall planned sales volume, the ICAC secretariat estimated roughly 2 million to 3 million tons (9.2 million to 13.8 million bales) will be sold and that the ending stocks will be around 11 million to 12 million tons (50.5 million to 55.1 million bales).
China imported much of the surplus stock on the world market the last two seasons, allowing prices to remain relatively high. Its imports this season are expected to decrease 40% from last season to 3.1 million tons (14.2 million bales), ICAC said.
The reserves sales price is significantly higher than the import price with a 40% tariff, ICAC said. Thus unless international prices rise above the mid-90s and drop imports below expectations, China could account for some 37% of world imports, ICAC indicated.
Futures open interest dropped 223 lots Monday to 156,459, with maturing DecemberΆs down 11 lots to 373, MarchΆs down 780 lots to 110,756 and MayΆs up 443 lots to 23,930.
Certificated stocks declined 12,082 bales to 225,614. There were 5,859 newly certified bales, 17,941 bales decertified and none awaiting review.
The Cotlook A Index fell 75 points Tuesday morning to 85.15 cents. The premium to MondayΆs March futures settlement narrowed two points to 6.53 cents.