Cotton Slides Amid Demand Concerns
ChinaΆs two-month auctions of government-owned stocks ahead of the 2015-crop harvest resulted in total sales far below expectations and only a fraction of the total offered.
Cotton futures settled lower Tuesday as sharp losses in global stock markets stoked new concerns about demand for the fiber crop.
Benchmark December settled down 30 points to 62.70 cents, in the middle of its 98-point range from up 18 points at 63.18 to down 80 points at 62.20 cents.
December narrowly printed the lowest intraday price since it posted the contract low just hours before the last supply-demand report on Aug. 12. March closed down 45 points to 62.13 cents.
Volume dipped to an estimated 17,900 lots from 19,286 lots the previous session when spreads totaled 3,237 lots or 17%, block trades 500 lots, EFP 277 lots and EFS 109 lots. Options volume totaled 3,597 calls and 1,078 puts.
ChinaΆs two-month auctions of government-owned stocks resulted in total sales of only 63,412 metric tons (291,246 480-pound bales), just 3.4% of the total offered, according to data reported by CottonChina.org.
The current phase of state reserve auctions was concluded at the end of August, avoiding competition with the soon-to-be harvested 2015 crop, which is reported likely to show improvements in both yields and quality.
The sales volume came in far below expectations and just a fraction of the 1 million tons (4.593 million bales) that Chinese officials had indicated they would like to sell.
Relatively high floor prices on the state offerings as compared with market prices, adequate available inventories and slumping domestic mill use were cited as contributing to the poor sales performance.
Mills were reported buying only hand-to-mouth, unwilling to extend coverage in the uncertain market atmosphere.
The lowest priced-cotton, from the 2011 domestic crop, accounted for the large bulk of the sales, 52,695 tons (242,023 bales). Only 988 tons (4,538 bales) from the 2012 crop were sold, and mills purchased 9,730 tons (44,689 bales) of imported cotton.
A large question still looms over how China will dispose of its huge remaining stockpile.
Much of the worldΆs excess stock is held by the Chinese government from purchases made by the China National Cotton Reserve Corp. under its stockpiling policy from 2011-14, the International Cotton Advisory Committee said in a report early last month.
The reserve made its final purchases of the 2013-14 crop last March, with sales that began July 10 continuing as August began on an accumulated stocks volume estimated at 11.3 million tons (51.9 million bales), the ICAC report indicated.
Futures open interest edged up 97 lots Monday to 180,189, with DecemberΆs up 279 lots to 127,015 and MarchΆs down 170 lots to 40,433. Cert stocks declined 4,235 bales to 67,197.
