U.S. crop estimate cut nearly a million bales from the August forecast, much more than generally expected, while world ending stocks projected at a new all-time high.
Cotton futures closed above highs of the prior six weeks in benchmark December Thursday as traders digested USDA supply-demand estimates featuring nearly a million-bale cut in the U.S. crop and a new all-time high in world ending stocks.
December advanced for the fourth consecutive session, settling up 95 points to 68.09 cents, just off the high of its 185-point range from down 81 points at 66.33 to up 104 points at 68.18 cents. It posted the highest intraday price since July 24 and the highest close since July 14.
Volume totaled an electronically estimated 31,700 lots, against a final 35,968 lots the previous session when spreads accounted for 14,456 lots or 40%, EFS 85 lots and EFP 32 lots.
U.S. production prospects fell much more than generally expected to 964,000 bales to 16.538 million, mainly on reductions in Texas, Georgia and Arkansas. Veteran analysts couldnΆt recall a previous million-bale cut in the September crop estimate from the August forecast.
Planted acres and acres for harvest were both cut 360,000 to 11.01 million and 9.88 million, respectively, with abandonment now estimated at 10.27%. Prospective yields dropped to 803 pounds per acre from 820 pounds foreseen a month ago, 821 last year and the five-year average of 819.
Beginning stocks fell 150,000 bales to 2.45 million, based on reported stocks in public storage as of July 31, which were significantly below the calculation of supply minus use for 2013-14.
Export prospects fell 700,000 bales to 10 million on lower domestic supplies and reduced foreign import demand, while domestic mill use remained at 3.8 million bales. Ending stocks are forecast at 5.2 million bales, down 400,000 bales from a month ago and 38% of total use.
The upland production estimate fell 986,000 bales to 16.946 million, with the Texas crop skidding 500,000 bales to 6.6 million. Estimated Pima production rose by 22,000 bales to 578,000.
By regions, upland crop prospects declined 370,000 bales to 5.03 million in the Southeast, 65,000 bales to 3.2 million in the Mid-South, 567,000 bales in the Southwest to 6.968 million and showed the only increase on a gain of 16,000 bales to 762,000 in the West.
The USDAΆs projection on the marketing year average farm price of 58 to 70 cents per pound reflected a decline of two cents on the upper end, with the midpoint of 64 cents down from 65 cents forecast last month and 77.50 cents last season.
Globally, production rose by 370,000 bales to 118.01 million, trade fell 1.11 million bales to 35.2 million, consumption dropped 480,000 bales to 112.12 million and ending stocks climbed 1.21 million bales to a new all-time high of 106.29 million.
The world carryout, 59% of which is expected to be concentrated in China, is estimated at 94.8% of cotton consumption.
Beginning world stocks rose by 340,000 bales to 100.30 million, with ChinaΆs 2013-14 imports up 520,000 bales from the August estimate to 14.12 million and IndiaΆs opening inventory up 200,000 bales to 11.32 million. IndiaΆs crop grew a million bales to 30 million and its exports fell 100,000 bales to 5.7 million.
Stocks in the rest of the world outside China grew 660,000 bales to 43.38 million, up from beginning stocks now pegged at 38.34 million bales.
The market bounced quickly after touching the session low on USDAΆs weekly export sales report showing net U.S. upland cancellations of 34,200 running bales, largest since the week ended June 21, 2012. New sales were 73,200 bales and cancellations were 107,400 bales.
Cancellations of 105,900 bales by China involved some origin switches and may have been linked partly or largely to scarce nearby supply availability ahead of volume new-crop harvesting rather than to lack of demand, some analysts said.
Futures open interest expanded 2,207 lots Wednesday to 182,657, with DecemberΆs up 530 lots to 111,941 and MarchΆs up 1,468 lots to 54,576. Cert stocks declined 6,504 bales to 53,056, a new low since January.
World prices as measured by the Cotlook A Index gained 110 points Thursday morning to 75.25 cents, narrowing the premium to WednesdayΆs December futures settlement by 25 points to 8.11 cents.
