Cotton Gyrates to New High Close for Move

U.S. supply-demand estimates showed a 250,000-bale cut in production, a 200,000-bale reduction in exports and a 100,000-bale trim of ending stocks. World forecasts showed lower production, consumption and stocks.

U.S. cotton futures gyrated widely on the heels of monthly supply-demand estimates and finished modestly ahead at a new high for the move Wednesday.

Spot March settled up 37 points to 64.81 cents, in the upper half of its 120-point range from up 79 points at 65.23 cents to down 41 points at 64.03 cents. It hit the high prior to the USDA report, plunged in a flash to the low following the release, quickly bounced to around midrange, fell back to the low and rallied to finish at a new high close since Aug. 21.

May settled up 35 points to 65.56 cents and December 2016 closed up 19 points to 65.90 cents.

Volume quickened to an estimated 29,994 lots from 22,577 lots the previous session when spreads accounted for 9,203 lots or 36%, EFP 649 lots and EFS 100 lots. Options volume totaled 5,189 calls and 2,744 puts.

U.S. estimates showed a 250,000-bale cut from a month ago to 13.03 million bales in production, a 200,000-bale reduction to 10 million in exports and a slight 100,000-bale downward revision to 3 million in ending stocks. The export cut was based on lower available supply and lagging sales to date, USDA said.

The domestic mill use estimate remained at 3.7 million bales for a total market offtake of 16.74 million bales. Ending stocks are estimated at 21.9% of the offtake, down from 30.3% foreseen in May.

The crop cut — all in the upland forecast to 12.58 million bales — stemmed mainly from lower production in North and South Carolina. Pima prospects were unchanged at 451,000 bales. Estimated all-cotton yields fell 14 pounds to 768 pounds, 61 pounds below the five-year average.

By regions, upland production estimates declined 252,000 bales to 3.843 million in the Southeast and 18,000 bales to 2.052 million in the Mid-South, with small increases of 17,000 bales to 6.174 million in the Southwest and 3,000 bales to 511,000 in the West.

The estimates for Texas and Georgia, the top two cotton producing states, were unchanged at 5.8 million and 2.3 million bales, respectively.

The USDAΆs projected range for the marketing year average price received by producers of 56 to 62 cents was narrowed a cent on each end, with the midpoint unchanged at 59 cents.

Globally, USDAΆs updated estimates lowered production by 1.92 million bales to 103.71 million, trimmed consumption by 200,000 bales to 111.39 million and reduced ending stocks by 1.7 million bales to 104.39 million.

Crop reductions for Pakistan, China, the United States, Turkey, Greece and Turkmenistan were partially offset by an increase for Australia. Mill use cuts for China, India and Pakistan were mostly offset by increases for Vietnam and Bangladesh.

Consumption for China, the worldΆs top cotton consumer, was pared 500,000 bales to 32.5 million, near Cotton OutlookΆs earlier estimate (initially misstated in TuesdayΆs closing comments) of 32.38 million bales. Crop prospects for India, the worldΆs largest cotton producer, held steady at 28.5 million bales.

Projected world trade rose by a million bales to 35.35 million. Import forecasts were increased for Pakistan, Vietnam and Bangladesh but lowered for China. Export increases for India, Brazil and Australia more than offset the U.S. reduction.

The world carryover is expected to decline 7.62 million bales from beginning stocks and account for 93.7% of consumption, against the 2014-15 stocks-to-use ratio of 101.5%.

Meanwhile, a slowing in U.S. weekly export sales from the prior weekΆs marketing year high is expected in the USDA report scheduled for release at 7:30 a.m. CST Thursday.

Upland export sales, which hit a crop year high of 287,100 running bales during the week ended Nov. 26, have averaged 219,274 RB the last four reporting weeks. The four-week average for upland shipments is 74,058 RB.

Futures open interest gained 873 lots Tuesday to 191,781, with MarchΆs down 15 lots to 143,077 and MayΆs up 139 lots to 27,293. Cert stocks were unchanged at 65,302 bales.