Analysts reported expecting a slight increase from last month in the U.S. 2013-14 production estimate.
Cotton futures settled mixed Tuesday as spot July surged to an intraday high above 90 cents and widened its inversion over December in the heaviest dealings in a long while.
July finished in the lower half of its 403-point range, still up 141 points to 86.46 cents after trading from down 19 points at 86.46 cents to up 384 points at 90.49 cents. It settled at its highest close since March 5 after posting its highest intraday print since April 4.
December lost 70 points to settle 85.18 cents, in the lower quarter of its 217-point range from 109 points at 86.97 cents to down 108 points at 84.80 cents. It hit the low near the end of the session.
Estimated volume leaped to a whopping 69,000 lots from 40,788 lots the previous session when spreads totaled 22,504 lots or 55%, EFP 1,467 lots, block trades 300 lots and EFS 8 lots. Options volume jumped to 20,143 lots — 12,038 calls and 8,105 puts.
Analysts on average expect a slight increase in U.S. 2013-14 production prospects in USDAΆs supply-demand report on Wednesday along with a boost in exports and the carryout, according to a Dow Jones Newswire survey.
Crop estimates averaged 14.13 million bales within a range from 13.7 million to 14.66 million, with export expectations at an average of 11.41 million bales within a range from 11 million to 12 million and ending stocks at 3.28 million within a range from 2.75 million to 4.1 million.
No change is expected in the estimated planted area ahead of the report on June 28 from the National Agricultural Statistics Service on the acreage actually planted and still intended for planting.
But USDA, if it sees enough evidence, could adjust its projections on abandonment and projected acres for harvest and revise its yield and production estimates.
The USDAΆs first projection for the 2013 crop last month pegged the output at 14 million bales, 19% below the final 2012 output. The forecast was based on the March planting intentions, which also were down 19% from 2012 and the lowest in four seasons.
The lower intentions were attributed mostly to higher prices for competing crops. Some analysts subsequently had thought a late freeze in the Texas High Plains might result in some of those acres being replanted in cotton, though the shift for various reasons wasnΆt expected to be large, and that the Delta and Southeast also might boost their cotton acres beyond the intentions.
But the situation now is clouded by delayed plantings in the Southeast and Delta owing to cool, wet conditions, while expectations for abandonment on the High Plains have remained high because of the drought.
The USDA last month projected U.S. demand down 10% to 15 million bales, against nearly 16.7 million estimated for 2012-13. A smaller supply and reduced foreign import demand, particularly from China, were projected to keep demand lower, near that of 2011-12.
Exports, forecast at 11.5 million bales, would account for 77% of total demand. Domestic mill demand was expected to reach 3.5 million bales, 3% above the estimate of 3.4 million for 2012-13.
With overall U.S. demand expected to exceed production for the first time in three years, USDA projected ending stocks on July 31, 2014 to decline a million bales from the beginning level to 3 million.
Futures open interest edged up 274 lots Monday to 183,324, with JulyΆs down 5,494 lots to 74,699 and DecemberΆs up 5,223 lots to 99,001.
Certificated stocks declined 1,700 bales to 528,824. There were 2,148 newly certified bales, 3,848 bales decertified and 21,114 bales awaiting review.
World values as measured by the Cotlook A Index gained 70 points Tuesday morning to 93.90 cents. The premium to MondayΆs July futures settlement narrowed 109 points to 7.25 cents.
