Weather favors Delta fieldwork. World cotton production shortfall of 4.3 million bales in 2016-17 projected by the ICAC. First increase in world prices in three years forecast for next season.
Cotton futures rallied late in the session to finish a two-sided trading session within tight price ranges narrowly mixed and little changed Tuesday.
Spot May settled down six ticks at 58.90 cents, just above the midpoint of its 64-point range from up 22 points at 59.18 to down 42 points at 58.54 cents. It touched the session high in the early morning, sank back below the overnight low below the prior-day low and bounced to close within six points of the opening Monday night.
July slipped three points to close at 58.62 cents, while December edged up three points to settle at 58.33 cents.
U.S. equities traded lower but off the dayΆs lows late in the cotton session as oil prices turned higher and the U.S. dollar index posted gains against a basket of currencies.
On the crop scene, limited precipitation is expected to favor fieldwork in areas of the Delta still not too soggy from previous rains ahead of a return of rainfall early next week.
Volume slowed to an estimated 27,752 lots from 36,014 lots the previous session when spreads accounted for 20,749 lots or 58% EFS 1,700 lots and EFP 218 lots. Options volume totaled 5,012 calls and 963 puts.
Traders eyed an international Cotton Advisory Committee report that world cotton planting is expected to expand 1% to 31.3 million hectares (77.3 million acres) in 2016-17 as heavier production falls shy of stable consumption.
With cotton planting commencing in the Northern Hemisphere, the ICAC estimates, converted to 480-pound bales from metric tons, projected world production up 4% to 105.4 million.
Consumption is forecast up 0.4% to 109.7 million bales, resulting in a production shortfall of 4.3 million bales. This follows a 2015-16 production deficit estimated by ICAC at 8.1 million bales.
World cotton trade is expected to recover by 1% to 34.4 million bales after declining a projected 3% this season. Vietnam and Bangladesh are likely to be the largest 2016-17 cotton importers on volumes forecast up 25% to 6.4 million bales and 5% to 5.1 million bales, respectively.
Global ending stocks, projected down 8% to 93.4 million bales this season, are expected by ICAC to fall by 5% in 2016-17 to 89.1 million bales. This mean the world stocks-to-use ratio would decline to 81.2% in 2016-17 from 85.4% in 2015-16.
The ICAC projected world prices as measured by the Cotlook A Index at averages of 70 cents in 2015-16 and 72 cents in 2016-17. The forecast for 2016-17 would mark the first increase in world prices in three years.
The USDAΆs World Agricultural Outlook Board will issue its first “official” supply-demand forecasts for 2016-17 in May.
Futures open interest dropped 597 lots Monday to 219,943, with MayΆs down 3,263 lots to 100,186 and JulyΆs up 1,074 lots to 61,314. Cert stocks fell 266 bales to 45,446.
