May bounced off limit down. U.S. plantings expected to rise mainly on return of prevented-planted area. The midpoint of the price forecast for 2016-17 of 58 cents at the farm level would be the lowest since 47.80 cents in 2008-09.
Cotton futures plunged to new multiyear lows on heavy volume Monday, with most-active May hitting the 300-point daily limit before more than cutting the loss in half, while maturing March closed marginally ahead.
- May settled down 103 points to 56.50 cents, 197 points off the low of its 309-point range from 57.62 to 54.53 cents. Prices fell to the lowest weekly continuation lows since 2009.
- Thinly traded March eked out a nine-point gain to close at 58.01 cents, up from its low of 56.97 cents. July settled down 107 points to 56.26 cents and December, which had set four contract lows in a row, closed down 90 points to 56.19 cents after hitting a new low at 54.19 cents.
- Volume jumped to an estimated 59,953 lots from 18,476 lots the prior session when spreads accounted for 6,126 lots or 33% and EFS 1,700 lots. Options volume totaled 8,347 calls and 10,169 puts.
U.S. cotton acreage is expected to rise next season mainly on a return of area prevented from planting last season because of excessively wet conditions, USDA analysts say. Slightly more favorable prices for cotton against acreage-competing crops also have figured into the mix.
The USDA’s early projection, based on analysis and reported at its annual Outlook Forum last week, put plantings at 9.4 million acres, up 800,000 acres or 9.6% from 2015 and 300,000 acres above the recent National Cotton Council survey. Growers were unable to plant more than 500,000 acres of intended cotton last year because of adverse weather.
However, relatively higher input costs for cotton may put it at a disadvantage against competing crops, USDA analysts acknowledge.
Downside cotton price risk is cushioned by the marketing loan program, which has been reinforced by the addition of commodity certificates to eliminate payment-limitation reductions, they add.
But they also point out that potential payments for other crops under the Agricultural Risk Coverage and Price Loss Coverage programs could induce growers with generic cotton base acres to increase plantings of alternatives.
The USDA projected a harvested area of nearly 8.5 million acres based on regional abandonment rates mostly near long-run averages. An exception is the Southwest where abandonment is expected below the average of 15%.
As a result, U.S. abandonment of 10% is projected up from 5.9% in 2015-16 but well below the 2011-14 seasons. With the Southwest expected to account for 60% of U.S. cotton area in 2016, crop conditions in this region once again will have considerable impact on total production.
The USDA forecast for a national yield of 812 pounds is based on regional average yields and the projected production of 14.3 million bales is 1.4 million bales or 10.5% above 2015 but 2 million bales below 2014.
With carry-in stocks at 3.6 million bales, total supply — 17.9 million bales — would rise approximately 7.5% from 2015-16. Domestic mill use is projected at 3.6 million bales, unchanged from 2015-16, and exports at 10.7 million bales, up nearly 13% on expectations for higher U.S. exportable supplies and relatively tight stocks outside China.
Ending stocks, projected to remain flat at 3.6 million bales, would account for 25.2% of total market offtake, compared with 27.5% in 2015-16 and with a five-year average of 23%.
The 2016-17 marketing year average U.S. upland price at the farm level is projected to range between 53 and 63 cents per pound, with the midpoint of 58 cents down 2.5% from the estimate for 2015-16 and the lowest since 47.8 cents in 2008-09.
Futures open interest increased 850 lots Friday to 195,608, with MarchΆs down five lots to 421 and MayΆs down 80 lost to 121,333. Cert +stocks grew 2,214 bales to 68,318. Awaiting review were 8,406 bales.
