With global 2017-18 cotton stocks outside China projected at “one of the highest volumes on record,” world prices are expected to tumble to a multi-year low, ICAC says. Managed money funds cut net longs 13,833 lots.
Cotton futures finished sharply lower Monday as traders awaited USDAΆs updated U.S. crop and world supply-demand estimates.
December lost 130 points to settle at 67.29 cents, near the low of its 156-point range from up 18 points at 68.77 to down 138 points at 67.21 cents. It opened on the high and touched the low in the late going.
March settled down 119 points at 67.19 cents, trading within a 136-point range from 68.46 to 67.10 cents. October shed 203 points to close at 67.72 cents, trading within a 386-point span from 71.42 to 67.56 cents.
The USDA is scheduled to release its world supply-demand report at 11 a.m. CDT on Wednesday along with updated U.S. acreage, yield and production estimates.
Volume rose to an estimated 24,095 lots from 18,691 lots the prior session when spreads accounted for 18,691 lots or 32%, EFS nine lots and EFP seven lots. Options volume dropped to 2,018 lots (879 calls and 1,139 puts) from 2,965 lots (1,905 calls and 1,060 puts).
With stocks outside China projected at “one of the highest volumes on record,” the International Cotton Advisory Committee cut its global 2017-18 cotton price forecast to the lowest in nine years.
World prices as measured by the Cotlook A Index are forecast to average 69 cents a pound in the marketing year beginning Aug. 1, down 2 cents from the June forecast, ICAC said in its July supply-demand report.
That would compare with 82 cents now projected by ICAC for 2016-17, 70 cents in 2015-16 and would be the lowest since 2008-09 when prices averaged 61.20 cents. The ICAC raised its estimate of the 2016-17 average a penny to 82 cents.
World stocks outside China are forecast to rise by 17% to 9.6 million metric tons (44.1 million 480-pound bales), ICAC said in its monthly report.
“This would be one of the highest volumes on record and indicates that prices should fall,” the intergovernmental association representing cotton producing and consuming countries added.
World ending stocks are forecast to decline 7% from 2016-17 to 17.15 million tons (78.8 million bales), ICAC said. ChinaΆs stocks are expected to decline 18% to 7.6 million tons (34.9 million bales) and its share of world stocks to fall to 44%. That would be the first time since 2011-12 that China held less than half the world stocks, ICAC said.
Global production is projected to increase 7% to 24.57 million tons (112.8 million bales) on a similar 7% expansion in cotton area to 31.8 million hectares (one hectare equals 2.471 acres), ICAC said. The cotton area remains below the average of 32.3 million hectares the prior 10 years despite prices above their long-term average.
World cotton consumption is forecast to increase 2% to 24.73 million tons (113.6 million bales) based on expectations of growth in the world economy, ICAC said.
Meanwhile, the latest traders-commitments reports showed managed-money funds sold 13,833 lots in cotton futures-options combined during the week ended Tuesday to cut their net longs to 31,340 lots. They liquidated 6,890 longs and added 7,043 shorts, the Commodity Futures Trading Commission figures showed.
Futures open interest grew 1,178 lots to 210,457 on Friday, with DecemberΆs up 414 lots to 162,857 and MarchΆs up 658 lots to 31,608. The now-expired JulyΆs OI dropped 13 lots to 66 (corrected), not counting 11 delivery notices issued for Monday. Notices for the period totaled 1,478 lots.
Certified stocks declined 3,030 bales to 106,137. There were 4,344 bales decertified and 1,314 newly certified bales. Awaiting review were 3,635 bales at Memphis.
