By Duane Howell
Profit-taking amid overheated technical readings and new fears that a deal may not get done in time to avert the U.S. fiscal cliff trimmed an advance to a 14-week high in cotton futures last week.
Spot March eked out a marginal 18 point-gain for the week ended Thursday, closing at 76.01 cents after settling the day before at 77.06 cents, its highest finish since Sept. 19.
Prices virtually erased gains for the period amid few signs of lawmakers and President Barack Obama reaching an agreement to prevent $600 billion in automatic tax increases and spending cuts set to begin Tuesday. Consumers under that scenario would be expected to curb purchases of cotton goods.
The market had advanced amid perceptions of tight nearby availability of desirable qualities, an unfavorable January-March weather outlook in some key cotton areas such as the West Texas Plains and prospects for sharp cuts in U.S. 2013 cotton plantings.
Many analysts agree that the huge overhang of Chinese stocks — projected at 47 percent of the record world carryout — and uncertainty about their disposition have depressed prices and kept a lid on rallies.
But some also agree with a trade analyst who said earlier this month that China is unlikely to dump its expensive stocks on a world market that is more than 50 cents lower. China is more likely to reduce its cotton crop in favor of food crops and subsidize the drop in production with its reserve stocks over the next two to three seasons, he said.
Cash grower-to-business sales during the four-day trading week fell to 43,628 bales on The Seam from 83,163 bales the previous week. Prices edged up 30 points to average 69.42 cents, reflecting a 53-point gain to 17.07 cents in premiums over loan repayment rates. Daily price averages ranged from 68.28 to 70.61 cents.
In futures, listing of the December 2015 contract for trading will be delayed until decisions are made on possible changes to certification procedures for deliverable cotton, the IntercontinentalExchange Inc. said.
The changes do not affect the qualities tenderable but rather the method by which bales that meet the quality specifications are registered as deliverable, Tim Barry, vice president of product development, said in an exchange notice.
“These changes under consideration may be determined to affect the value of the futures contract,” he said, adding that the delay is intended to preserve the ability to implement the changes for December 2015.
The contract was scheduled for listing Wednesday. A new listing date will be announced when it is determined if the changes will be implemented.
No details of the changes under consideration were revealed. The Atlanta-based exchange has been in the early stages of exploring an international delivery point or points, sources said.
Only U.S. cotton is accepted for delivery. The United States now is the worldΆs third-largest cotton producer behind China and India and is the worldΆs top cotton exporter.
U.S. cotton is expected to account for only about 15 percent of world cotton production this season but about 31 percent of world exports, according to the latest USDA estimates.
The No. 2 cotton futures contract long has been the pricing benchmark for most of the world cotton trade. A global contract, some say, would be less vulnerable to price-distorting squeezes.
Low liquidity that far out suggests the delay is unlikely to disrupt trading. Only one lot was open in the July 2015 contract.
On the crop scene, U.S. gins processed 14,200,500 running bales of all cotton from the 2012 output through Dec. 15, USDA reported, up 8.7 percent from 13,064,200 bales ginned through the corresponding point last season but down 6.1 percent from two years ago.
The latest crop estimate was up 11 percent from 2011. Converted to statistical 480-pound bales, roughly 85 percent of the 2012-crop had been ginned, compared with about 86 percent of the final output a year ago.
Separately, classing data showed USDA facilities graded 812,283 bales during the week ended Dec. 20 to bring the all-cotton total for the season to 14,525,834 running bales, about 87 percent of the December production forecast after the conversion to statistical bales.
Upland classing of 758,325 bales boosted the season total to 13,997,700 bales, of which cotton tenderable on futures amounted to 63.8 percent for the week and 58.3 percent for the season.
Looking ahead, the National Cotton Council has undertaken its annual effort to measure producersΆ early planting intentions.
The council has mailed survey forms to producers across the Cotton Belt. The survey, conducted to aid with industry planning and policy deliberations, provides the basis for the economic outlook presented to delegates during the NCCΆs annual industry-wide meeting.
Survey results, always eagerly awaited, will be announced during the joint meeting of NCC program committees on Saturday, Feb. 9, in Memphis.
To enhance survey accuracy, producers are encouraged to respond by the Jan. 16 deadline. The survey has been distributed through a combination of regular mail and email with the intention of reaching all the nationΆs cotton farms.
Meanwhile, producers took advantage of the market rally of the last two reporting weeks ended Dec. 21 to fix prices on a net 2,403 lots of 2012-13 on-call cotton, according to Commodity Futures Trading Commission data. This cut their unfixed position through July to 14,700 lots.
Changes in unfixed holdings on the producer side included a two-week reduction in March of 3,317 lots to 7,819, an increase in May of 953 lots to 1,504 and a cut of 39 lots in July to 5,377.
Unfixed 2012-13 mill holdings rose by 3,124 lots to 36,802 on increases of 302 lots to 17,025 in March, 1,643 lots to 9,339 in May and 1,179 lots to 10,483 in July.