World cotton consumption forecast by ICAC to hold about steady next season and exceed production by 3.31 million bales. Slower export sales and strong shipments expected in U.S. weekly report on Friday.
Cotton futures slid to session lows about 10 minutes before the close and settled near there Thursday, down six to 33 points.
Spot July closed down 30 points to 62.87 cents, below lows of the prior two days and a seven-session low finish. It traded within an 86-point range, from up 50 points at 63.67 to down 36 points at 62.81 cents.
December, now the open interest leader, lost the most, settling at 62.67 cents and trading within a 91-point span from 63.51 to 62.60 cents.
Volume slowed to an estimated 29,955 lots from 34,017 lots the previous session when spreads accounted for 16,011 lots or 47% and EFP 35 lots. Options volume totaled 1,603 calls and 817 puts.
World cotton consumption is expected to remain roughly steady in 2016-17 after falling 3% in 2015-16 owing primarily to low polyester prices and weak global economic growth, according to the latest estimates by the International Cotton Advisory Committee.
Converted to 480-pound statistical bales, ICACΆs estimates put global 2016-17 cotton mill use at 108.99 million, down 180,000 bales or 0.16% from its May projection but up 370,000 bales or 0.34% from this season.
High domestic cotton prices, particularly compared with those of polyester, are expected to cause cotton consumption in China, the worldΆs largest cotton user, to decrease 5% to 30.77 million bales in 2016-17.
However, mill use is forecast to climb in several other big cotton-consuming countries. After falling 3% to 23.88 million bales in 2015-16, cotton consumption in India, the second largest user, is projected to rise by 4% to 24.8 million bales because of favorable textile export policies, well integrated downstream industries and competitive prices.
World production, which dropped 17% to 100.17 million bales in 2015-16 as the cotton area shrank and many countries experienced below-average yields, is projected to increase 6% to 105.68 million bales in 2016-17 as the planted area expands and yields improve. The estimate is up 230,000 bales for the month.
The ICAC estimates world mill use will exceed production by 3.31 million bales in 2016-17, compared with a crop shortfall of 8.45 million bales in 2015-16 for a two-year stocks drawdown of 11.76 million bales.
World ending stocks are projected to decline 4% to 90.3 million bales by the end of 2016-17 following an 8% reduction to 93.6 million in 2015-16. However, ending stocks outside China are forecast to rise 3% to 40.4 million bales.
The world stocks-to-use ratio would drop to 82.85% next season from 86.18% this season. World prices as measured by the Cotlook A Index are projected to average 70 cents in 2016-17, even with the estimate for 2015-16 but down from 71 cents last season.
Meanwhile, USDAΆs weekly export report on Friday appears expected mostly to show slower sales and strong shipments. The report has been delayed a day by the Memorial Day holiday on Monday.
Upland sales for shipment this season have averaged 120,672 running bales the last four weeks and upland shipments have averaged 234,517 RB.
Futures open interest declined 1,582 lots Wednesday to 201,195, with JulyΆs down 2,909 lots to 89,768 and DecemberΆs up 782 lots to 92,372. This marked the first time DecemberΆs OI has exceeded JulyΆs. Cert stocks grew 4,056 bales to 107,731. Awaiting review were 1,406 bales.
