Cotton Meanders to Little Changed Finish

ChinaΆs cotton imports fell nearly 66% in August from a year earlier. Expected reduction in global cotton trade this season linked to projected decline in ChinaΆs imports. Increased global export competition foreseen.

Cotton futures meandered within tight ranges between modest gains and slight losses and settled little changed and narrowly mixed Tuesday.

Benchmark December closed down three points to 62.52 cents, just below the midpoint of its 54-point range from up 32 points at 62.87 to down 22 points at 62.33 cents. March edged up six points to close at 62.39 cents.

Volume slowed to an estimated 13,,900 lots from 17,291 lots the previous session when spreads accounted for 3,793 lots or 22%, EFP 407 lots and EFS 11 lots. Options volume totaled 3,990 calls and 2,968 puts.

News that ChinaΆs cotton imports fell nearly 66% last month from a year earlier to 70,000 metric tons (321,500 bales) may have contributed to keeping rally attempts in check.

The USDA left its estimate of ChinaΆs 2015-16 imports at 5.75 million bales in its September supply-demand report, down 31% from the previous yearΆs 8.28 million bales and 59% from 2013-14Άs 14.12 million bales.

With ChinaΆs cotton stocks remaining near historic highs, Beijing is expected to limit imports. Price differentials between internal and international prices also were considered partly to blame for the sharp August import decline.

The USDAΆs projected 3% decline to 34.3 million bales in global cotton trade this season, 26% below the record of 46.4 million bales in 2012-13, is mainly because of the expected fall in ChinaΆs imports.

Several other importers, however, are expected to purchase more cotton in 2015-16, including Vietnam, Pakistan, Bangladesh and Turkey.

Reduced world import demand is expected to result in increased competition among the major exporters. U.S. exports are forecast to decline 1.25 million bales to 10 million owing both to lower exportable supplies and the reduction in raw cotton imports by China.

Brazil and Uzbekistan also are projected to export less, shipping 3.8 million bales and 2.3 million bales, respectively. On the other hand, exports by India and Australia are forecast to increase to 4.9 million bales and 2.5 million bales, respectively, still below their average shipments of the last several years.

Relatively high domestic cotton prices in China during the past several seasons have led to an expansion of cotton yarn imports that has supplanted spinning there, USDA analysts point out in an Economic Research Service report.

ChinaΆs cotton yarn imports reached the equivalent of 9.7 million bales in 2014-15, 1.1 million-bale-equivalents above 2013-14 and double the yarn imports of 2011-12. India, Pakistan and Vietnam have benefited considerably.

If domestic cotton spinning in China remains flat or declines further this season, yarn exports to China likely will continue to see additional growth, USDA analysts say. And in addition to India, Pakistan and Vietnam, other countries may benefit with increased cotton mill use.

Futures open interest declined 606 lots Monday to 178,451, with DecemberΆs down 1,112 lots to 120,054 and MarchΆs up 281 lots to 44,772. Cert stocks dropped 935 bales to 57,423.