Spot May fell to its lowest close since Jan. 26. World 2017-18 cotton consumption projected by ICAC to outpace production by 5.97 million bales. Prices forecast to decline and the world economy to strengthen.
Cotton futures extended losses in another round of heavy trading Tuesday as the May contract fell a second day to new low close for the move.
Spot May closed down 62 points to 74.85 cents, its lowest finish since Jan. 26 and below a much-watched support area at 75.05. It settled in the lower third of its 117-point range from up 25 points at 75.72 to down 92 points at 74.55 cents.
May options expire in seven trading sessions, on April 13, and first notice day for May deliveries now is 12 trading sessions ahead, on April 24. The market will be closed April 14 for Good Friday.
July settled down 51 points to 76.61 cents, trading within a 103-point range from 77.37 to 76.34 cents. December settled on its lowest close since Feb. 1, down 49 points to 72.99 cents. It traded within a 118-point range, from 73.81 to 72.63 cents.
Volume was estimated at 58,264 lots, against 60,763 lots the prior session when spreads accounted for 30,772 lots or 51% and EFP 144 lots. Options volume edged up to 9,159 lots (4,022 calls and 5,129 puts) from 9,122 lots (4,985 calls and 4,137 puts).
World cotton consumption is projected to outpace production by 5.97 million bales in 2017-18 following a global crop shortfall of 6.06 million bales in 2016-17, according to the latest estimates of the International Cotton Advisory Committee.
A conversion of the estimates to 480-pound statistical bales from metric tons pegged world production up about 1% to 106.19 million as 2016-17 prices encourage farmers to plant cotton. However, ICAC expects the average yield to decline about 2%.
The ICAC projected U.S. production at 3.8 million tons or 17.45 million bales, little changed from 2016-17 estimated output. It indicated yields are expected to decline from this seasonΆs high level to closer to the five-year average and abandonment to rise from the below-average loss of 2016.
This followed USDAΆs U.S. projection of a 21% jump in U.S. plantings to 12.2 million acres, based on an early March survey of producers. The USDA will issue its first official 2017-18 world supply-demand forecasts in May along with its final estimates of U.S. 2016-17 production, acreage and yield.
World consumption may recover by 1% to 112.16 million bales as cotton prices decrease, ICAC indicated, noting also that “growth in the global economy is expected to be much stronger in 2017 and 2018.”
In its first 2017-18 price forecast, ICAC projected world values as measured by the Cotlook A Index to average 73 cents, down from the secretariatΆs estimate for 2016-17 of 78 cents.
The ICAC expects 2017-18 world ending stocks to decline 7% to 76.01 million bales, 67.8% of consumption, down from its estimate for 2016-17 of 74.1%. The USDA last month estimated 2016-17 world stocks at 80.5% of mill use.
Futures open interest edged up 354 lots Monday to 280,256, with MayΆs down 6,110 lots to 127,811, JulyΆs up 5,025 lots to 65,025 and DecemberΆs up 1,290 lots to 77,282. Cert stocks grew 4,266 bales to 327,415. Awaiting review were 352 bales at Memphis.
