By Duane Howell DTN Cotton Correspondent
U.S. figures viewed as taking on more importance as the world balance sheet faces a confusing dual set of fundamentals.
Cotton futures traded lower throughout the day Thursday as traders jockeyed positions ahead of USDAΆs updated supply-demand estimates.
Spot May snapped a seven-session string of higher closes, settling off 74 points to 86.50 cents, around the lower quarter of its 100-point range from up a point at 87.25 cents to down 99 points at 86.25 cents. It posted the high within the early minutes of overnight dealings.
July closed down 88 points to 87.08 cents, in the lower reaches of its 99-point range, and December settled off 33 points to 85.98 cents, near the high of its 95-point trading span.
Volume slowed to an estimated 17,300 lots from 18,746 lots the previous session when spreads totaled 5,831 lots or 31%, EFS 2,187 lots, block trades 628 lots and EFP 210 lots. Options volume totaled 5,934 calls and 9,984 puts.
Expectations for the supply-demand report on Friday are for a slight increase in U.S. exports and a corresponding decrease in ending stocks, with no change in production this month — though ginning and classing figures have suggested a larger crop — or in domestic mill use.
The USDA is scheduled to release the report at the new time of noon EST and 11 a.m. CST.
Globally, little change is expected in production and a slight increase in consumption wouldnΆt be surprising. The world carryout could slip and still be an all-time high, with China still holding at least half or more and with much of its stocks owned by the government.
Outside China, consumption is enjoying something of a revival, Sharon Johnson, senior cotton specialist at Knight Futures in Atlanta, pointed out in a report. At 70.74 million bales, itΆs the highest in five years.
The record rest-of-the world consumption was in 2006 at 73.91 million bales, only 3.17 million bales more than the estimate for this season.
“Expectations into 2013-14 are for that deficit not only to narrow but for usage to reach, if not exceed, the 2006 record,” Johnson said.
China is feeding that improvement with its imports of cotton yarn, which hit another record in January. India, Pakistan, Bangladesh and Vietnam have been key recipients of that cotton yarn demand, she added, noting that IndiaΆs cotton yarn exports hit a record in January.
With the world balance sheet facing a confusing dual set of fundamentals, U.S. supply-demand has taken on more importance, Johnson observed, especially considering the widely anticipated drop in planted area this spring.
Since the National Cotton CouncilΆs mid-December through mid-January survey showed intentions to cut cotton plantings by 27% from last year, however, price relationships between cotton and grains have shifted appreciably and at the moment favor softening the cotton reduction.
Futures open interest expanded 1,946 lots Wednesday to 198,351, with MayΆs up 497 lots to 136,882, JulyΆs up 508 lots to 34,012 and DecemberΆs up 981 lots to 26,062.
Certificated stocks declined 7,215 bales to 429,387. There were 4,208 newly certified bales, 11,423 bales decertified and 11,763 bales awaiting review.
World values as measured by the Cotlook A Index gained 30 points Thursday morning to 93.60 cents. The premium to WednesdayΆs May futures settlement widened four points to 6.36 cents.
