Global growth forecast cut to 3.4%. Record cotton crop reported looming in India. U.S. new-crop export commitments rose to 3.348 million running bales, already 34% of the forecast.
Cotton futures crashed through sell stops to a new contract low in benchmark December Thursday, shrugging off another round of strong U.S. new-crop export sales.
December closed off 203 points to 66.05 cents, lowest finish since October 2009 on a continuous weekly chart and in the lower quarter of its 258-point range from up 16 points to 68.24 to down 242 points at 65.66 cents. It ticked up to the session high the first few minutes after release of USDAΆs weekly export sales-shipments report.
Slower global growth foreseen by the International Monetary Fund contributed to the skid, analysts said. The IMF predicted that global growth will be 3.4% in 2014, below its April forecast of 3.7%. But the fund still expects the growth of the worldΆs economy to accelerate a bit to 4% in 2015.
Volume quickened to an estimated 28,400 lots from 8,912 lots the previous session when spreads accounted for 1,599 lots or 18%, EFP 24 lots and EFS 14 lots. Options volume totaled 7,040 calls and 5,794 puts.
A Bloomberg report quoted IndiaΆs biggest cotton trader as saying the countryΆs cotton output is set to reach a record high as delays in monsoon rains prompt farmers to switch from soybeans and peanuts to cotton.
B.K. Mishra, chairman of the Cotton Corp. of India, said production is poised to expand as much as 2.6% to 40 million bales of 170 kilograms (31.25 million 480-pound bales). While the area is increasing from 11.7 million hectares (28.9 million acres), the harvest will be delayed by the worst start to the monsoon since 2009, he said.
The Cotton Corp. buys the crop at government-set minimum prices. The crop projection would lift IndiaΆs current ranking as the worldΆs second largest cotton producer in USDA estimates to the top slot.
In its July supply-demand report, USDA projected IndiaΆs 2014-15 production at 28 million 480-pound bales, down 500,000 bales from its June forecast and 8.2% below the 2013-14 output of 30.5 million bales. This would be IndiaΆs smallest cotton crop in four seasons.
Meanwhile, net U.S. all–cotton export sales for delivery in 2014-15 rose to 372,400 running bales during the week ended July 17 from 342,900 bales the previous week, lifting new-crop commitments 3.348 million RB.
Commitments widened the lead over forward sales a year ago by 272,000 bales to 3.348 million, 34% of the latest USDA forecast. A year ago, forward sales were 22% of the current USDA estimate for 2013-14.
All-cotton commitments for 2013-14 edged up 800,000 bales on net upland reductions of 1,900 bales and net Pima sales of 2,700 bales. This nudged old-crop commitments to 10.804 million running bales, 2.79 million or 21% behind year-ago sales and still 106% of the USDA estimate.
Puny shipments of upland and Pima combined of 73,200 bales, down from 86,600 bales the previous week, brought exports for the season to 9.961 million RB. The gap behind exports a year ago widened to 2.465 million bales or almost 20%.
Roughly 224,300 running bales remained to be shipped to reach the USDA estimate, which is down about 19% from exports last season. Exports stand at about 98% of the estimate, about the same as the percentage of final shipments at the corresponding point last season.
Futures open interest gained 511 lots Wednesday to 153,969, with DecemberΆs up 278 lots to 120,620 and MarchΆs up 234 lots to 25,986. Cert stocks continued to decline, falling 23,036 bales to 182,731, smallest since February.
World prices as measured by the Cotlook A Index held steady Thursday morning at 83.15 cents. The premium to WednesdayΆs October futures close widened three points to 14.38 cents.
Forward A Index values for 2014-15 gained 20 points to 75.80 cents, narrowing the discount to the 2013-14 index by that amount to 7.35 cents and widening the premium to WednesdayΆs December futures close by three points to 7.72 cents.
