December settled at its lowest close since July 17. Weak U.S. weekly export sales expected. Traders will scan the report for any cancellations by China.
Cotton futures plummeted for the second day in a row Wednesday as long speculators and funds continued to rush for the exits and volume jumped.
Benchmark December lost 462 points under the expanded daily trading limit to close at 84.24 cents, its lowest finish since July 17 and near the low of its 465-point range from down 21 points at 88.65 to down 486 points at 84 cents. The low marked a loss of 972 points or 10.4% from FridayΆs high.
October fell to within eight ticks of the 500-point limit and closed off 485 points at 83.91 cents, while March shed 294 points to settle at 83.34 cents, 14 points off the low of its 313-point range.
Volume jumped to an estimated 51,800 lots from 25,059 lots the previous session when spreads totaled 6,793 lots or 27%, EFS 50 lots and EFP 33 lots. Options volume totaled 10,473 calls and 15,772 puts.
Weak U.S. export sales are expected from USDA on Thursday for the week ended Aug. 15, a period in which December futures surged above 90 cents and averaged 90.81 cents on a closing basis.
Net all-cotton sales for 2013-14 during the previous week totaled 56,500 running bales, including 38,500 of upland, and the report due at 7:30 a.m. CDT is generally expected to show smaller sales.
Traders will scan the report for any cancellations by China, the worldΆs largest cotton import market and largest overseas buyer of U.S. cotton in recent seasons.
China accounted for 42% of U.S. all-cotton exports in the 2012-13 marketing year ended July 31 and 54% in 2011-12.
Consumption in China — also the worldΆs leading mill user of cotton is projected by USDA unchanged from 2012-13 at 36 million bales but well below the 50 million bales used in 2009-10.
ChinaΆs cotton spinners have lost market share over the last several years as a result of the governmentΆs established price floor that has maintained domestic prices above world prices.
Replacing some domestic spinning, China has imported significant amounts of cotton yarn the past several seasons, USDA analysts have pointed out, including an estimated equivalent of 8 million bales in 2012-13, twice that of 2010-11.
Beneficiaries of ChinaΆs yarn imports include India and Pakistan, where cotton mill use has risen steadily the past several seasons.
Mill use is forecast at a record 23.3 million bales in India, 750,000 bales above 2012-13, and at 11.7 million bales in Pakistan, a 6% increase and close to its record high of 12 million in the mid-2000s.
The first estimate of the 2013-14 output by the Cotton Association of India this week pegged its prospective crop at 29.07 million 480-pound bales, up from USDAΆs August projection of 28 million.
This may have contributed to the market nosedive on Tuesday, though the possibility of larger Indian production has been talked in trade circles for some time because of the favorable monsoon.
The cotton area isnΆt expected to exceed that of 2012-13, the association said, attributing the larger crop to higher yields. The CAI also estimated the 2012-13 output at 27.8 million 480-pound bales, against USDAΆs 26.5 million.
Futures open interest fell 4,391 lots Tuesday to 209,987, with DecemberΆs down 5,206 lots to 165,687 and MarchΆs up 833 lots to 33,231. Certificated stocks declined 311 bales to 40,907.
World values as measured by the Cotlook A Index skidded 360 points Wednesday morning to 93.55 cents. The premium to TuesdayΆs December futures settlement widened 40 points to 4.69 cents.
