ChinaΆs raw cotton imports fell 52% last month from a year ago and dropped 54% in the January-May period. Strong pace reported in sales from reserve stocks.
Cotton futures settled on steep losses Tuesday, with most-active December finishing below lows of the previous two sessions amid favorable growing conditions in much of the U.S. belt.
December closed down 160 points to 64.39 cents, in the lower quarter of its 250-point range from up 47 points at 66.46 cents to down 203 points at 63.96 cents. It ended back below its nine-day and 18-day moving averages.
Spot July, with just two trading sessions left before first notice day, finished down 154 points to 62.85 cents, trading within a 224-point range from 64.69 to 62.45 cents.
Sharp losses in grains on weather forecasts for rains in the Midwest and lower commodities in general amid a rebound in U.S. dollar index futures contributed to pressure on cotton.
Volume rose to an estimated 36,176 lots from 25,783 lots the previous session when spreads accounted for 10,645 lots or 41% and EFP 96 lots. Options volume totaled 9,924 calls and 6,339 puts.
Traders noted reports that ChinaΆs cotton imports fell 52% to 78,235 metric tons or 359,300 statistical 480-pound bales last month from a year ago, according to customs data.
Imports for the first five months of calendar 2016 slid 54% from the January-May period last year to 357,693 tons or 1.6 million bales and totaled 791,876 tons or 3.6 million bales for 10 months of the crop year.
The latest USDA estimate of ChinaΆs imports for the 2015-16 marketing year ending July 31 also is down 46% from the prior year, coming in earlier this month unchanged from the prior forecast at 4.5 million bales.
With two months then left in the marketing year, imports had totaled 81% of the USDA projection.
The USDA expects ChinaΆs 2016-17 raw cotton imports to hold steady with this season but to remain sharply below the levels of just a few years ago because of changes in policies aimed at reducing surplus stocks.
ChinaΆs cumulative sales from its reserve stocks since the current series of auctions began May 3 now are reported to have exceeded 900,000 tons or 4.1 million bales.
The sales are to continue through August, ending prior to the new-crop harvest, and could total up to 2 million tons or 9.2 million bales, China has indicated.
Sales are made through a daily auction where a minimum price is set for each lot offered at auction, USDAΆs Foreign Agricultural Service noted earlier this month in a world cotton markets and trade circular.
A floor price is set each week based on the average of the previous weekΆs internal market price and the Cotlook A Index of world values. The minimum price of each lot is the floor price adjusted based on quality. All the cotton being sold has been regraded and weighed.
The recent sales pace has suggested China could sell the entire 2 million tons by the time the auctions end. However, even those large sales would represent less than one-fifth of the reserve stocks, estimated at 11 million to 11.5 million tons or 50.5 million to 52.8 million bales.
Futures open interest expanded 1,823 lots Monday to 198,132, with JulyΆs down 2,947 lots to 10,815 and DecemberΆs up 4,392 lots to 157,679. Cert stocks grew 2,734 bales to 130,770. Awaiting review were 3,018 bales.
