December tested 50% retracement of the June rally. Growth forecast for China cut. ChinaΆs share of global cotton imports expected to fall sharply.
Cotton futures closed mixed Wednesday as July posted the boardΆs only gain amid positioning ahead of first notice day.
Most-active December settled off 72 points to 86.60 cents, extending its losing streak to three sessions in a row amid perceptions of improved U.S. crop prospects.
December closed about the middle of its 167-point range from down 152 points at 85.80 cents to up 15 points at 87.47 cents. It shaved the loss after testing at the intraday low a 50% retracement (85.64) of its 784-point June rally.
July gained 42 points to close at 84.50 cents, still 718 points below its intraday high last Friday. It finished in the upper half of its 153-point range from down 58 points at 84.40 to up 95 points at 85.93 cents. Only two trading sessions are left ahead of first notice day.
Volume slipped to an estimated 21,200 lots from 23,285 lots the previous session when spreads totaled 9,266 lots or 40%, EFP 1,021 lots and EFS 186 lots. Options volume totaled 1,991 calls and 3,966 puts.
Traders noted that HSBC cut its growth forecast for China for this year and next to 7.4% from 8.2% and 8.4%, respectively. The cut was attributed to BeijingΆs decision to place economic reform ahead of short-term stimulus.
Slower growth in the worldΆs largest cotton consumer and importer could negatively affect the market over time, depending upon reform details, analysts say.
China is the largest export market for U.S. cotton, accounting for 41% of sales to overseas customers this marketing year. Exports are estimated at 80% of the total offtake of U.S. cotton this season and 76% next season.
The USDA projects ChinaΆs imports next season at 11 million bales, down 45% (9 million bales) from 2012-13, driven mainly by expected constraints on the worldΆs exportable supplies. ChinaΆs share of world imports is estimated to decline to 29% from 43% this season.
Global 2013-14 imports are forecast to decline 18% from the prior year as moderate import increases in Mexico, Pakistan, Turkey and Vietnam are more than offset by the large decline in China.
Futures open interest fell 2,130 lots Tuesday to 175,996, with JulyΆs down 5,344 lots to 16,319 and DecemberΆs 2,829 lots to 145,183.
Certificated stocks continued to grow, rising 1,388 bales to 545,805. There were 3,588 newly certified bales, 2,200 bales decertified and 58,282 bales awaiting review.
World values as measured by the Cotlook A Index fell 175 points Wednesday morning to 94.30 cents. The index premiums to TuesdayΆs futures settlements widened 70 points to 9.32 cents to July and narrowed eight points to 6.98 cents to December.
