Increase generally expected in USDAΆs first official U.S. 2016-17 production forecast from its preliminary projection at the Outlook Forum. U.S. upland contracting totaled only 1% of prospective plantings.
Cotton futures finished lower Monday as weak trade data from China weighed on sentiment ahead of a strong U.S. planting pace expected in the weekly progress report after the close and prior to USDAΆs supply-demand estimates on Tuesday.
Spot July settled down 50 points to 61.33 cents, near the low of its 88-point trading range from up 23 points at 62.06 cents to down 65 points at 61.18 cents. It settled on a new low close since April 15. December closed down 33 points to 61.04 cents, trading within an 80-point range from 61.55 to 60.75 cents.
Volume increased to an estimated 24,954 lots from 19,205 lots the previous session when spreads accounted for 9,020 lots or 47%. Options volume totaled 9,740 calls and 4,601 puts.
An increase in U.S. 2016-17 production from USDAΆs preliminary forecast at its Outlook Forum in February appears generally expected in its first official new-crop estimate as part of TuesdayΆs report.
The production forecast will be based on the March prospective plantings that showed growers intended to expand cotton acres to 9.56 million, up 11% from last year. A return to cotton of acres that didnΆt get planted last year because of excessively wet conditions was expected to account for the bulk of the expansion.
Some published analystsΆ estimates are reported to have production at 14.5 million bales, up from USDAΆs forum forecast of 14.3 million bales off a projected 9.4 million planted acres. Production in 2015-16 is estimated at 12.87 million bales.
Estimates by some analysts also have 2016-17 exports at 10.5 million bales, down from 10.7 million foreseen by USDA but a million bales above the projection for this season, with ending stocks at 3.95 million bales, up from 3.6 million and 3.5 million, respectively.
Globally, USDAΆs 2016-17 forum projections anticipated that mill use would exceed production for a second year, drawing down excessive world stocks by an additional 5 million bales. The International Cotton Advisory Committee this month projected a drawdown of 3.72 million bales.
World production was expected by USDA to rise 4%, despite continued price and income constraints on planted area, with yields believed likely to recover to more normal levels in some major producing countries. Mill use was expected to grow about 1% after declining slightly in 2015-16.
China has been pursuing policies which have discouraged production and placed limitations on imports in order to dispose of surplus government-held stocks, and USDA analysts expected those policies to support a rebound in mill use in the worldΆs largest cotton consumer.
Meanwhile, U.S. upland contracting totaled only 1% of prospective plantings as of May 1, down from 3% a year ago and the lowest since a like percentage in 2010, according to informal surveys by USDAΆs Agricultural Marketing Service.
The estimates donΆt include cotton consigned to marketing organizations but do include cotton contracted with them.
By regions, forward bookings compared with a year earlier included 2% in the Southeast, down from 3%; 7% in the Mid-South, up from 3%; and less than 0.05% in the Southwest, down from 1%. Contracting was nil in the West, as it was last year.
Futures open interest dropped 344 lots Friday to 189,327, with JulyΆs down 1,646 lots to 107,311 and DecemberΆs up 1,247 lots to 65,586. Cert stocks grew 2,787 bales to 68,597. Awaiting review were 3,436 bales, including 855 bales at Dallas-Fort Worth and 2,581 at Memphis.
