China said to hold the key to prices, with its national reserves projected at nearly 80% of its total stocks. Mills fixed 3,201 lots in December and producers 87 lots.
Cotton futures rallied sharply after posting a new low for the move for the third session in a row and finished modestly ahead Friday to snap a three-day losing streak.
Benchmark December closed up 25 points to 83.49 cents, smack in the middle of its widened 211-point range from down 81 points at 82.43 to up 130 points at 84.54. It printed the lowest intraday price since June 3. December lost 59 points for the week and 169 points or 2% for the month.
October edged up 10 points to close at 83.70 cents and March gained 43 points to settle at 82.74 cents.
Volume increased to an estimated 21,500 lots from 18,307 lots the previous session when spreads totaled 5,324 lots or 29%, block trades 110 lots and EFP 45 lots. Options volume totaled 3,356 calls and 3,527 puts.
Wire services reported that China is laying the groundwork to end its controversial cotton stockpiling program and possibly shift to a direct cotton subsidy, which has been talked in trade circles for months.
ItΆs generally believed that any new program wouldnΆt be implemented until the 2014-15 marketing year. However, this also could have implications for deferred 2013-14 futures contracts.
China holds the key to prices, many analysts agree. While world stocks are expected to rise 9% this crop year to a record 93.8 million bales, according to USDA, the growth continues to occur in China, with a huge supply in ChinaΆs national reserve.
Those reserve stocks are expected to account for nearly 80% of ChinaΆs total stocks in 2013-14, USDA analysts say. ChinaΆs cotton policies have continued to support domestic prices above world prices.
In 2010-11, ChinaΆs 21% share of global stocks was its lowest in 20 years. By the end of 2013-14, however, ChinaΆs share is projected to nearly triple to 62%. At the same time, the share of stocks outside China is forecast to decline for the third consecutive season to 38%.
In the rest of the world, the margin by which production is expected to exceed consumption is projected to narrow to 9.53 million bales from 14.64 million bales last season and 25.81 million bales in 2011-12.
Meanwhile, unfixed on-call positions in December fell 3,201 lots to 26,560 on the mill side last week and dipped 87 lots to 9,389 on the producer side, according to the latest call data from the Commodity Futures Trading Commission.
The net call difference declined 3,114 lots to 17,171, which was 12.15% of DecemberΆs declining open interest, against 11.91% a week earlier. The ratio of unfixed mill positions to those held by producers slipped to 2.83:1 from 3.14:1.
Mills have been doing scale-down fixations, patiently allowing the market to come to them. They fixed 784 lots in March to shave their open call holdings there to 16,667, while producers added 24 lots to nudge theirs up to 1,984.
Futures open interest fell 3,622 lots Thursday to 178,700, with DecemberΆs down 4,104 lots to 131,709 and MarchΆs up 132 lots to 35,199.
Certificated stocks dropped 2,375 bales to 21,096. There were 796 newly certified bales, decertification of 3,171 bales and 3,425 bales awaiting review.
World values as measured by the Cotlook A Index slipped 40 points Friday morning to 89.15 cents. The premium to ThursdayΆs December futures settlement widened 11 points to 5.91 cents. For the week, the index fell 70 points.
