Bearish forecasts for higher U.S. ending stocks and a new all-time high in the world carryout have capped a breakout rally against the prevailing long-term downtrend and driven cotton futures lower.
Benchmark December shed 336 points for the week ended Thursday to close at 72.59 cents. This was down only 43 points from the close on Aug. 10, when the USDA supply-demand data sent prices down as much as the daily limit.
December fell to a low for the period of 71.59 cents, down 548 points from the high the day before the August supply-demand report. It remained on a closing basis above its 40-day and 50-day moving averages.
Cash grower-to-business sales declined to 3,893 bales from 8,172 bales on The Seam. Prices fell 111 points to an average of 69.48 cents, while the premium over loan repayment rates rose 30 points to 17.60 cents. Daily price averages ranged from 75.98 cents down to 59.11 cents.
The market pared losses amid tightness of available U.S. supplies ahead of the volume movement of new-crop cotton. Scale-down mill buying contributed to support. Reports indicated IndiaΆs main cotton-producing state, Gujarat, remained dry. But the burdensome supply outlook kept rallies in check.
Most analysts had expected USDA to reduce both domestic and world ending stocks estimates for 2012-13 from a month ago.
But USDA boosted U.S. ending stocks 700,000 bales to 5.5 million, 35 percent of total offtake, and raised the world carryout 2.28 million bales to a new all-time high of 74.67 million. However, 46 percent of the projected world carryout is in China.
U.S. production prospects rose by 651,000 bales to 17.651 million, up 13 percent from the previous year, based on USDAΆs first crop survey of the season. The crop estimate was some 850,000 bales above the average estimate of analysts in two separate surveys.
Exports remained forecast at 12.1 million bales despite the larger supply, with lower imports foreseen by China, and domestic mill use was unchanged at 3.4 million bales.
Yields are forecast at an average of 784 pounds per acre, down six pounds from last year and from the five-year average of 817 pounds.
Acres for harvest are estimated at 10.81 million, up 14 percent from 2011. Abandonment is expected to total 1.83 million acres, 14.5 percent of the planted acreage.
Preliminary figures released by USDAΆs Farm Service Agency after the supply-demand report suggested plantings were smaller than previously estimated. The FSA data put all-cotton plantings at 11,813,771 acres, failed acres thus far at 734,556 and standing acres at 11,079,215.
The National Agricultural Statistics Service used the June report on plantings and intended plantings in the August crop forecast. This left the planted area estimated at 12.635 million acres.
The preliminary FSA data indicated plantings were 821,229 acres below the initial NASS estimate. Although subject to review and updates, the FAS figures would seem to support the view of many industry observers that the June report overstated the acreage.
The FSA plantings data, released publicly last year for the first time, can point to a general trend. Last year, USDA raised its September estimate of the planted area by 990,000 acres from the August report.
A big surprise in the NASS report was a 3.2-million-bale jump from a year ago to 6.7 million bales in top-producing Texas. Statewide abandonment is estimated at 1.6 million acres or 23.5 percent, with yields forecast at 618 pounds, down from the five-year average of 700 pounds.
District estimates projected the Texas High Plains crop at 4.35 million bales, up from last yearΆs drought-stricken 1.835 million bales. Acres for harvest were estimated at 3.27 million, reflecting an abandonment of 990,000 acres or 23 percent of the planted area. Yields were pegged at 639 pounds, up from 566 pounds last year.
Globally, ending stocks are up 6.87 million bales from an upward revision of 1.12 million bales in beginning stocks. The world stocks-to-use ratio rose to a new record high of 69 percent from 66.4 percent projected last month and 64.3 percent last season.
Meanwhile, U.S. crop conditions declined slightly during the week ended Aug. 12, with fair to good down two percentage points to 62 percent, poor to very poor up a point to 28 percent and excellent up a point to 10 percent.
This marked the third straight week of decline. Poor-very poor cotton was 11 points above the 10-year average.
Cotton in Texas, projected to account for 38 percent of the U.S. crop, showed poor to very poor up two points to 43 percent, fair down two points to 33 percent and good to excellent steady at 24 percent.
Good-excellent cotton in Georgia slipped a point to 60 percent and poor to very poor rose a point to 7 percent.
Boll opening across the belt increased three points to 12 percent, against 11 percent a year ago and 10 percent for the five-year average, while cotton setting bolls rose 15 points to 89 percent, compared with 86 percent and 81 percent, respectively.
In other news, ChinaΆs imports jumped to 406,000 metric tons (1.865 million bales) last month from 157,100 tons (721,500 bales) in July 2011, according to customs data. Imports surged to 3.46 million tons (15.9 million bales) in January-July from 1.48 million (6.8 million bales) during the seven-month period last year.
Analysts have pondered how long the import surge can continue. The USDA cut ChinaΆs projected 2012-13 import demand nearly 50 percent to 13 million bales from the estimated 2011-12 record of 24.3 million.
The decline is linked to a combination of larger supplies, lower consumption and government policies directed at supporting prices. However, increases in several other countries where consumption is recovering are expected to partially offset the decline in China.