Cotton Bounces to Close Slightly Ahead
U.S. export bookings stand at 29% of the USDA forecast and shipments at 5%. Limited world cotton consumption growth expected by ICAC.
Cotton futures bounced from an early dip to finish slightly higher in most contracts in a lightly traded, narrow-range session Thursday.
Benchmark December settled up 27 points to 62.76 cents, around the upper third of its 83-point range from down 28 points at 62.21 to up 55 points at 63.04 cents. March closed up 24 points to 62.50 cents.
Volume slowed to an estimated 13,300 lots from 17,315 lots the previous session when spreads accounted for 6,523 lots or 38% and EFP 212 lots. Options volume totaled 2,882 calls and 3,876 puts.
Net U.S. all-cotton export sales of 71,600 running bales during the week ended Aug. 27 for shipment this marketing year, up from 63,300 bales the previous week, boosted commitments to 2.787 million bales.
The gap behind year-ago commitments widened a bit to 2.324 million bales. Commitments amounted to 29% of the USDA forecast, compared with 47% of the current estimate of final 2014-15 shipments a year ago.
All-cotton shipments rose to 160,600 RB from 109,000 RB, bringing exports for the season to 499,200 RB. Shipments widened the lead over year-ago exports to 84,800 RB and amounted to 5% of the USDA projection. A year ago, commitments were 4% of the current 2014-15 estimate.
To achieve the USDA estimate, shipments need to average roughly 191,700 RB a week, while sales averaging around 144,000 RB would match the export projection.
Sales for shipment next season of 2,200 RB, against 20,500 RB the week before, brought 2016-17 commitments to 171,600 RB, compared with year-ago forward bookings of 393,400 RB.
On the demand outlook, limited world cotton consumption growth is expected this season, says the International Cotton Advisory Committee.
High cotton prices and low polyester prices in China, the worldΆs largest cotton consumer, have made its cotton spinning sector less competitive, ICAC said in a monthly report.
The Cotlook A Index and the price of polyester in China were essentially equal during most of the 2000s, with cotton sometimes the cheaper. The prices diverged in 2009-10 and cotton prices have remained substantially above those of polyester since then.
During the buildup of government-held reserves, domestic cotton prices, as measured by the China Cotton Index, were around 144 cents a pound, but quickly fell when Beijing announced it would no longer buy cotton for its stockpile.
Domestic prices continued to fall last month, averaging 95 cents and narrowing the gap with international cotton prices. However, polyester prices also have fallen, maintaining the spread compared with cotton.
Lack of competitive pricing for cotton, coupled with turmoil in domestic stock markets, has curtailed growth in ChinaΆs cotton spinning sector, ICAC said, projecting ChinaΆs cotton consumption around 7.7 million metric tons (35.4 million 480-pound bales), far below the peak of 10 million tons (45.9 million bales) in the mid-2000s.
Mill use has shifted to lower cost countries in recent years, mainly in Asia, as cotton spinning has become less competitive in China.
World consumption is forecast by ICAC to grow 2% and reach 25.03 million tons (114.96 million bales), which remains below the volume consumed just before the global economic recession.
Futures open interest gained 331 lots Wednesday to 179,141, with DecemberΆs down 1,024 lots to 124,540 and MarchΆs up 1,413 lots to 41,617. Cert stocks declined 3,244 bales to 62,637.
