Cotton Rallies From Morning Sinking Spell

A smaller-than-expected hike in U.S. crop estimate helped the market to rally off a new four-week low posted ahead of the supply-demand report.

Cotton futures closed with a small gain at midrange Friday after rallying off a new four-week low to a 12-session high in benchmark December on a smaller-than-expected hike in the U.S. crop estimate.

December settled up eight points to 63.13 cents, trading within a 215-point range from down 100 points at 62.05 to up 115 points at 64.20 cents. It posted the lowest intraday print ahead of the USDA supply-demand report since it set the contract low at 61.20 cents on Aug. 12, and quickly spiked the high when the updated estimates were released.

Thinly traded October closed up 61 points to 64.09 cents and March gained 11 points to 62.91 cents. For the week, December gained 58 points.

Volume rose to an estimated 31,300 lots from 16,132 lots the previous session when spreads accounted for 5,704 lots or 35% and EFP 144 lots. Options volume totaled 3,595 calls and 4,058 puts.

U.S. all-cotton production is pegged at 13.428 million bales, up 3% from the August estimate but down 18% from 2014, with abandonment expected to fall to 4.56% from 11.35% foreseen a month ago and 15.31% in 2014.

Yields are projected at an average of 789 pounds per harvested acre, down from 795 pounds forecast in August, 838 pounds last year and the five-year average of 829 pounds. Record upland yields are expected in Arizona, Kansas and Tennessee.

Upland production is forecast at 12.977 million bales, up from the August estimate of 12.65 million but down 18% from 2014, with Pima output projected at 451,000 bales, up from 432,000 but down 20%, respectively.

Acreage updates were made in several states, putting upland plantings at 8.398 million acres, down 4% from the previous estimate and down 23% from last year. Upland acres for harvest are estimated at 8.012 million, up 3% from the August forecast but down 13% from 2014.

The expected harvested area of Pima or extra-long staple cotton at 154,300 acres is down 19% from last year.

By regions, upland production prospects rose by 50,000 bales from a month ago to 4.205 million in the Southeast, declined 70,000 bales to 2.22 million in the Midsouth, increased 362,000 bales to 6.062 million in the Southwest and dipped 15,000 bales to 490,000 in the West.

Prospective upland production increased by 450,000 bales to 5.75 million in Texas and by 100,000 bales to 2.2 million in Georgia, the No. 2 cotton-producing state.

Expected exports rose by 200,000 bales to 10.2 million, down from a slight upward revision to 11.25 million bales in 2014-15, and domestic mill use remained at 3.7 million bales, up from 3.58 million last season.

Ending stocks increased 100,000 bales to 3.2 million, down from last seasonΆs 3.7 million and 23% of total market offtake.

The marketing year average farm price is forecast to range from 58 to 68 cents, with the midpoint of 62 cents falling 3 cents from last month on larger U.S. supplies and lower world consumption.

Globally, USDA cut consumption 1.21 million bales to 113.44 million, shaved production 250,000 bales to 108.74 million and raised ending stocks 1.07 million bales to 106.26 million, down from 110.91 million in 2014-15. The stocks-to-use ratio is 93.7%, down from 99.4% the prior year.

Ending stocks in the rest of the world outside China are forecast at 41.64 million bales, up from 40.61 million estimated last month but down from 43.99 million the prior season. The rest-of-world production surplus is expected to narrow to 1.3 million bales.

Futures open interest fell 2,000 lots Thursday to 178,578, with DecemberΆs down 1,939 lots to 121,945 and MarchΆs down 160 lots to 43,405. Cert stocks declined 606 bales to 58,472.