Cotton prices this season expected to encourage a 5% expansion in world cotton plantings in 2017-18, ICAC says. World mill use projected to exceed production by 4.5 million bales.

Cotton futures rallied from a moderate dip below the prior-session low to finish higher in July Tuesday, underpinned by suspected mill fixations.

July settled up 42 points to 79.37 cents, near the high of its 105-point range from down 57 points at 78.38 to up 48 points at 79.43 cents. It closed above highs of the prior three sessions, finishing 90 points from its contract high.

December edged up 13 points to close at 74.93 cents, just off the high of its 50-point range from 74.48 to 74.98 cents. The inverted July-December straddle widened 29 points to a 444-point July settlement premium, highest since March 31.

Volume rose to an estimated 19,152 lots from 15,301 lots the previous session when spreads accounted for 5,590 lots or 37% and EFP 30 lots. Options volume increased to 1,460 lots (1,360 calls and 2,508 puts) from 605 lots (407 calls and 198 puts).

Higher cotton prices this marketing year are expected to encourage farmers to expand plantings by 5% to 30.8 million hectares (76.1 million acres) in 2017-18, says the International Cotton Advisory Committee.

Converting ICACΆs estimates to 480-pound bales from metric tons, the secretariat projects world production to rise 4% to 108.3 million from this seasonΆs 104.5 million.

World consumption is forecast to grow 2% to 112.8 million bales from 110.7 million to surpass production for the third consecutive season. Mill use in China, the worldΆs largest cotton consumer, is forecast to grow 1% to 35.4 million bales, accounting for 31% of global consumption.

Global cotton trade, which is projected up 5% this season to 36.5 million bales after declining the prior three seasons, is expected to expand 2% to 37.2 million bales in 2017-18.

World ending stocks, projected down 7% to 79.8 million bales in 2016-17, are forecast to fall more than 5% to 75.4 million next season. This would reflect a 2017-18 production shortfall of 4.5 million bales, compared with crop deficit of 6.2 million bales in 2016-17.

Sales from ChinaΆs reserve stocks totaled 1.86 million bales in April, down from 2.14 million sold in March. ChinaΆs stocks are expected to have fallen 17% to 42.7 million bales by the end of 2016-17, which would be 54% of the world total.

The ICAC projected world prices as measured by the Cotlook A Index to average 71 cents in 2017-18, compared with its estimate of 79 cents for 2016-17. The Forward A Index for 2017—18 ended last week at 83.15 cents.

The USDAΆs World Agricultural Outlook Board will issue its first official world 2017-18 supply-demand forecasts on May 10.

Futures open interest continued to increase Monday, rising 2,497 lots to 257,178, with MayΆs down 25 lots to 45, JulyΆs up 1,764 lots to 138,545 and DecemberΆs up 235 lots to 103,567. The last trading day for May is Monday.

Certificated stocks grew 17,748 bales to 321,742. There were 20,454 newly certified bales and 2,706 bales decertified. Awaiting review were 1,408 bales, including 440 at Galveston and 968 at Memphis.