Fed minutes showed officials open to the possibility of a June rate increase. Higher U.S. upland export sales for both crop years appear generally expected in USDAΆs weekly report.
Cotton futures closed mixed Wednesday as traders digested news shortly before the close that minutes from the Federal ReserveΆs April meeting suggested officials are keeping open the possibility of a June rate increase.
Spot July finished down 15 points to 62.05 cents, slightly below the midpoint of its 148-point range from up 68 points at 62.88 cents to down 80 points at 61.40 cents. It hit a nine-session high in the first 20 minutes of overnight dealings and the low around midmorning.
December settled up 18 points to 61.75 cents, around the upper third of its 88-point range from up 47 points at 62.04 to down 22 points at 61.16 cents. It finished above last weekΆs high at its highest close since May 4.
Officials said an interest-rate increase in June was possible if incoming data showed an improving economy, and sought to push back against market expectations that a move at its next meeting was unlikely, the Fed minutes showed as reported by Dow Jones Newswires.
While officials werenΆt committed to moving in June, they clearly sought to keep their options open at that meeting and in the communications that they planned to release afterward.
Stocks on Wall Street initially turned downward and U.S. dollar index futures strengthened on the heels of the news.
Cotton volume slowed to an estimated 23,076 lots from 31,003 lots the previous session when spreads accounted for 10,321 lots or 33% and EFS 101 lots. Options volume totaled 1,188 calls and 2,276 puts.
Expectations appear generally to favor higher U.S. upland export sales for both crop years in the USDA report on Thursday for the week ended May 12. Net upland sales the prior week were 103,500 RB for shipment this season and 3,300 RB for next season.
Upland sales the last four reporting weeks have averaged 79,600 RB and upland shipments have averaged 223,300 RB. Futures settlements ranged from 60.60 to 61.83 cents in July during the latest reporting week and from 60.57 to 61.37 cents in December.
Limited supplies — particularly of higher qualities — and sharply lower imports by China have reduced overall demand for U.S. cotton this season to a projected 30-year low to 12.6 million statistical bales, with exports expected to account for 71%, according to USDAΆs latest estimates.
Total demand — mill use plus exports — is forecast to increase 12% next season to 14.1 million bales, with exports projected to rebound to 10.5 million bales from 9 million bales this season and account for 74% of the 2016-17 offtake.
With projected world cotton trade down slightly in 2016-17, the U.S. share is expected by USDA to improve to 32% from this seasonΆs 26% but similar to that of 2014-15.
Supported by continued demand for U.S. cotton textile product exports, domestic mill consumption is estimated to remain flat next season 3.6 million bales.
Futures open interest expanded 2,614 lots Tuesday to 190,763, with JulyΆs up 1,657 lots to 101,504 and DecemberΆs up 881 lots to 72,829. Cert stocks grew 3,661 bales to 85,481. Awaiting review were 3,631 bales at Memphis. The exchange said 81 bales should have been reported Tuesday as decertified at Memphis.
