Poor monsoon rains in India, the worldΆs second largest cotton producer, consumer and exporter, may have offered support. India planning to hold onto grain supplies for its domestic market.
Cotton futures finished with a small loss in benchmark December Tuesday, failing to hold onto an early triple-digit gain.
December settled off 11 points to 70.10 cents, its second contract low close in a row and near the low of its 175-point range from up 138 points to 71.59 to down 37 points and a new low for the move at 69.84 cents. It hit the high by about 8:45 a.m. CDT, slid to a new low by a few ticks, and closed in the red for the sixth straight session.
July, which expires Wednesday, settled up 17 points to 75 cents and October closed off 14 points to 70.09 cents.
Volume totaled an electronically estimated 18,600 lots, against a final 18,549 lots the previous session when spreads totaled 2,860 lots or 15% and EFP 366 lots.
Concern about forecasts for a deficit monsoon in India may have offered support. India is the worldΆs second largest cotton producer, consumer and exporter. The monsoon is crucial to the production of various Indian crops.
IndiaΆs government, worried that poor monsoon rains will depress the countryΆs grain production, is planning to hold onto supplies for its domestic market instead of boosting exports — something that could push up prices for wheat and rice, Dow Jones Newswires reported.
India is the worldΆs No. 1 rice exporter and also has become a prominent supplier of wheat ever since the government lifted a ban on exports of the two grains in September 2011.
“We donΆt want to end up importing grains,” a senior food ministry official said in an interview with The Wall Street Journal, explaining plans to scale back commodity sales. “We have sufficient grain stockpiles, but naturally there will be an impact because of the weather situation.”
To avoid any shortfall, the government has dropped a plan to auction 5 million tons of rice from state stockpiles in the open market and to keep on hold a program under which wheat was being sold regularly through state-run trading companies to global bidders.
IndiaΆs 2014-15 cotton production was projected by USDA last month at 28.5 million bales, nearly 7% below the countryΆs 2013-14 output, despite an increase in the estimated area.
With demand for IndiaΆs textile product exports expected to remain strong, USDA projected its cotton consumption to rise 2% to a record 24.3 million bales.
But with world trade projected down 13% from 2013-14, mainly because of ChinaΆs reduction in raw cotton imports, IndiaΆs exports were forecast to decline 37% to 5.7 million bales.
Futures open interest dropped 418 lots Monday to 147,098, with JulyΆs down 175 lots to 1,708, DecemberΆs down 862 lots to 119,669 and MarchΆs up 388 lots to 19,832.
Certificated stocks declined 1,082 bales to 417,912. There were 3,812 newly certified bales, 4,894 bales decertified and 18,375 bales awaiting review.
World prices as measured by the Cotlook A Index fell 165 points Tuesday morning to 75.25 cents. The premium to MondayΆs July futures settlement narrowed 26 points to 10.42 cents.
Forward A Index values for 2014-15 dropped 170 points to 77.90 cents, widening the discount to the 2013-14 index by five points to 7.35 cents and the premium to MondayΆs December futures close by 15 points to 7.69 cents.
