After skidding on USDAΆs July supply-demand estimates, cotton futures have bounced to near the middle of a multi-month trading range.
Benchmark December eked out an 11-point gain to finish the week ended Thursday at 84.85 cents, less than a penny from the midpoint (85.64) of its 785-point range from 81.71 on Feb. 13 to the June 16 high of 89.56. And it settled just below the middle (85.08) of the range from 83.05 on June 25 to 87.11 on July 11. March dipped 20 points to 83.38 cents.
Widespread, soaking rains in the West Texas Plains contributed to sending December to a three-week low at midweek to 83.58 cents. But the rains came too late to help much of the dryland acreage in a region accounting for 80 percent of the stateΆs cotton area and 43 percent of the U.S. area.
Standing irrigated cotton will benefit, however, and enable producers to rest their wells, conserve water supplies and save some pumping costs.
Scale-down mill buying below 84 cents, basis December, helped to underpin the rally, analysts said, even though it appears U.S. exports may fall a bit shy of the downwardly revised estimate of 13.3 million bales.
Net current-crop export sales of all cotton of 55,200 running bales during the week ended July 11 lifted commitments to 13.557 million, up 927,000 bales or 7 percent from a year ago.
Commitments amounted to about 105 percent of the latest USDA estimate, compared with about 111 percent of final exports at the corresponding point last season.
All-cotton shipments of 139,800 running bales brought exports for the season to 12.294 million, up 1.475 million or about 14 percent from a year ago and about 95 percent of the USDA forecast. Year-ago shipments also were about 95 percent of final exports.
Yet weekly shipments need to average roughly 304,000 running bales to reach the estimate by the end of the marketing year July 31.
New-crop sales of 45,400 running bales of all cotton hiked 2013-14 commitments to 2.145 million, about 438,000 behind forward sales a year ago and about 20 percent of the USDA projection. A year ago, forward bookings also were about 20 percent of the current 2012-13 forecast.
On the U.S. crop scene, conditions slipped to a new low for the season during the week ended July 14, with good to excellent down two percentage points to 42 percent, fair steady at 32 percent and poor to very poor up two points to 26 percent.
In top-producing Texas, excellent cotton dipped a point to only 3 percent, good gained a point to 23 percent, fair eased a point to 35 percent and very poor edged up a point to 16 percent.
Ratings declined in Alabama, Arkansas, Kansas, Louisiana, Mississippi, North Carolina, Oklahoma, Tennessee and Texas; improved in California, Georgia, Missouri and Virginia; and held steady in Arizona and South Carolina.
Squaring advanced 18 points to 69 percent, down 11 points from a year ago and six points from the five-year average, while cotton setting bolls expanded seven points to 17 percent, down from 34 percent last year and 29 percent on average.
In the July supply-demand report, USDA left its U.S. crop projection unchanged at 13.5 million bales but upped abandonment off the June planted acreage data to 24 percent, up from 19.3 percent foreseen in June off the March intentions.
Abandonment in the Southwest was estimated at 40 percent, up from 32 percent projected in June, because of continued drought. U.S. acres for harvest at 7.8 million would be the third lowest since 1983, ranking above 7.6 million acres in 2008 and 7.5 million in 2009.
Yields nationally were raised to 831 pounds from 800 pounds projected in June. The forecast is down from 887 pounds in 2012-13 but up from the five-year average of 817 pounds.
On the futures trading scene, a world cotton contract is being worked on by the Intercontinental Exchange Inc. that would trade alongside the No. 2 contract, Dow Jones Newswires reported, quoting a company executive.
Ben Jackson, president and chief operating officer of ICE Futures U.S., said the exchange has had “in-depth” conversations about a global contract. He said it isnΆt clear when the contract will be finalized.
Futures contracts “either work and theyΆre very successful or they fail, so weΆre taking our time,” he told The Wall Street Journal at a cotton conference in New York.
The origin of the cotton that could be delivered to fulfill futures contracts is one point market participants are debating.
A cotton industry executive with knowledge of the negotiations said cotton from Brazil, the United States and Australia would be included in the new contract. More origins could be added later, the executive said.
On the international scene, cotton imports by China fell 22 percent in June from a month earlier to 269,800 metric tons (1.23 million bales), according to the China Cotton Association. Imports slid 43 percent from the corresponding month a year ago.
Meanwhile, trend-following funds added 3,259 lots to their net long position in cotton futures-options combined during the week ended July 9, two days before the market nosedived on USDAΆs supply-demand data.
They boosted their net longs 5.7 percent to 60,171 lots, according to the Commodity Futures Trading Commission. Index funds bought a net 138 lots to nudge their net longs up to 69,998 lots, while small traders sold 527 lots to shave theirs to 7,524 lots.
Commercials sold a net 2,071 lots, hiking their net shorts to 137,695 lots by adding 3,042 shorts along with 171 longs. In futures only, non-commercials increased their net long position by 1.2 percentage points to 41.1 percent of the rising open interest.