Rising stocks expected to pressure international prices in 2014-15, ICAC says. Projected world carryout reported big enough to cover estimated mill use for nearly 11 months.
Cotton futures finished at a new low close for the move in benchmark December Wednesday, extending a losing streak to three sessions in a row and six of the last seven.
December settled off 93 points to 72.47 cents, trading inside the prior-day range from unchanged at 73.40 to down 102 points at 72.38 cents. It held at the low 18 points above TuesdayΆs low for the move.
The market will trade regular hours Thursday, close Friday in observance of Independence Day and have a delayed reopening at 7 a.m. CDT on Monday. There will be no Sunday night trading.
Volume slowed to an estimated 14,500 lots from 17,754 lots the previous session when spreads totaled 2,968 lots or 17%, EFP 50 lots and EFS 9 lots. Options volume totaled 5,388 calls and 6,342 puts.
Higher ending stocks outside China and lower imports into China will put downward pressure on international prices in 2014-15, says the International Cotton Advisory Committee.
The ICAC cut its price projection for the upcoming marketing year to 82 cents from 87 cents foreseen a month ago, an unchanged 91 cents estimated for 2013-14 and 88 cents in 2012-13.
World production is likely to exceed consumption in 2014-15, though by a lesser amount than in the past four seasons, the Washington-based ICAC said in a monthly report.
As a result, world ending stocks are expected to grow 6% from a year earlier to 21.43 million metric tons or 98.43 million 480-pound bales. The stocks-to-use ratio would rise to 88.7% from 86.5%.
In other words, the world carryover would be enough cotton to cover mill use for nearly 11 months. This would mark the fifth consecutive increase in world stocks after a 27% fall in 2009-10.
China is estimated to hold nearly 60% of the world stocks, most of which is in the government reserve. The secretariat estimates the Chinese government held 11.7 million tons or 53.7 million bales at the end of June.
Consumption in China is forecast to grow next season, but mills strongly prefer high quality cotton. So itΆs considered unlikely the government will be able to draw down its reserve without offering significant discounts.
The ICAC estimates ChinaΆs stocks at the end of 2013-14 at 11.5 million tons or 52.8 million bales, up 19% from a year earlier, and says the stocks are likely to expand further in 2014-15.
Ending stocks outside China are expected to rise by 7% to 8.7 million tons or 39.96 million bales at the end of this season and projected to reach 9.7 million tons or 44.56 million bales at the end of 2014-15.
The latest ICAC estimates, converted to 480-pound bales, raised world production by 960,000 bales from a month ago to 116.52 million and shaved consumption by 230,000 bales to 110.87 million.
The USDA will weigh in with its updated supply-demand estimates next week. Increases from the June estimates are widely expected in U.S. projected yields, acres for harvest acres and production.
Futures open interest increased 1,498 lots Tuesday to 146,236, with JulyΆs down 234 lots to 1,890 and DecemberΆs up 1,483 lots to 120,919. Cert stocks grew 2,478 bales to 461,341. There were 5,206 newly certified bales, 2,728 bales decertified and 21,957 bales awaiting review.
The Cotlook A Index was unchanged Wednesday morning at 88.40 cents. The premium to TuesdayΆs July futures settlement widened 213 points to 11.32 cents.
Forward A Index values for 2014-15 dropped 20 points to 81 cents, widening the discount to the 2013-14 index by 20 points to 7.40 cents and narrowing the premium to TuesdayΆs December futures close by nine points to 7.60 cents.
