Volume soared to a huge estimated 84,127 lots. No updated U.S. cotton crop estimate expected from USDA this week. World cotton stocks outside China projected to increase this season.
Cotton futures settled lower on the front of the market for the third session in a row as volume soared amid huge spread trading Tuesday.
Spot March dropped 54 points to close at 75.09 cents, just off the low of its 104-point range from up 46 points at 76.09 to down 58 points at 75.05 cents. It settled below lows of the prior three sessions and back below its nine-day moving average.
May finished down 23 points at 76.14 cents, July slipped 16 points to 76.95 cents and December eked up six points to 74 cents.
Volume surged to an estimated 84,127 lots from 45,331 lots the prior session when spreads accounted for 29,046 lots or 64% and EFP 83 lots. Options volume rose to 6,296 lots — 4,514 calls and 1,782 puts — from 3,833 lots.
Only nine trading sessions now remain before first notice day for March deliveries. March options expire Friday.
Traders looked to USDAΆs monthly world 2016-17 supply-demand and U.S. weekly export sales-shipments reports, both scheduled for Thursday.
While USDA will update its world production forecast, it isnΆt expected to revise its U.S. crop estimate until after the end-of-season ginning report in March. The final report on U.S. 2016-crop acreage, yield and production will be in May.
In its latest 2016-17 estimates, Cotton Outlook raised its assessment of Chinese production by 250,000 metric tons (1.1 million 480-pound bales) to 4.75 million tons (21.8 million bales), primarily to reflect classing data in Xinjiang.
This followed USDAΆs increase in its estimate of ChinaΆs crop of a million bales to 22 million earlier last month.
ChinaΆs internal stock stocks are expected to decline this season by a narrower margin than projected in its previous report, despite a considerable increase in consumption, which was prompted by strong growth in spinning capacity in Xinjiang, Cotton Outlook said in a monthly review.
“Import restrictions and stock reduction via the domestic reserve auctions are likely to shape ChinaΆs cotton policy for some time to come, it added, “but the countryΆs eventual return as the worldΆs largest importer, at some point over the next few seasons, remains a feature of the medium to longer-term market outlook.”
While world stocks are expected to decline 1.24 million tons (5.7 million bales), the weak pattern of global consumption and increased expectation of output resulted in Cotton OutlookΆs estimate that stocks outside China will rise by more than 800,000 tons (3.7 million bales) by the end of the season.
The USDAΆs estimates showed it expected global stocks outside China to grow by 3.61 million bales from last season to 42.3 million, 56% of world-less-China consumption.
Robust U.S. export sales for shipment this season in recent weeks have stimulated some expectations for another increase in USDAΆs 2016-17 forecast following last monthΆs 300,000-bale hike to 12.5 million, largest since 2012-13. Others arenΆt so sure, citing increased competition foreseen from other exporters later this season.
Sales for the latest reporting week ended Feb. 2 may show a slight decline, however, partly because of the Lunar New Year holidays in China and some other Asian countries, sources say.
Futures open interest increased 771 lots Monday to 288,081, with MarchΆs down 5,444 lots to 137,789 lots and MayΆs up 4,313 lots to 74,767. Cert stocks grew 10,187 bales to 224,737. Awaiting review were 3,550 bales, including 2,318 bales at Galveston and 1,232 at Memphis.
