Traders awaited the U.S. weekly export sales-shipments report. U.S.-China trade conflict has raised concerns about sales cancellations by China. Talk of possible U.S. cotton transshipments circulated.
Cotton futures settled mostly higher Wednesday, with December bouncing from an overnight drop below lows of the previous three weeks to close on a modest gain.
December ended up 36 points at 84.18 cents, in the lower half of its 271-point range from down 88 points at 82.94 cents to up 183 points at 85.65 cents. It stayed within the range established by early morning after posting the low on the opening Tuesday night.
July eased 11 points to close at 83.21 cents, near the low of its 260-point range from 83.10 to 85.70 cents. First notice day is Monday (corrected from an earlier report). October gained the most, settling up 54 points to 85.36 cents.
Volume slowed to an estimated 37,200 lots from 71,932 lots the prior session when spreads accounted for 23,722 lots or 33%, EFP 1,380 lots and EFS 120 lots. Options volume declined to 23,143 lots (4,339 calls and 8,804 puts) from 29,953 lots (21,648 calls and 8,305 puts).
Traders awaited the U.S. weekly export sales-shipments report, set for release by USDA at 7:30 a.m. CDT on Thursday. Prices during the reporting week ended last Thursday ranged from the contract high of 96.50 to 92.61 cents, basis July, and from the contract high of 94.82 cents to 91.20 cents, basis December.
Net upland sales the last four weeks have averaged 27,226 bales a week for shipment this season and 181,000 RB for next season, down from 212,000 RB and 254,100 RB, respectively, the prior four weeks. Upland shipments have averaged 453,100 RB, up from 446,800 the previous four weeks and well ahead of the pace required to make the USDA estimate.
The USDA this month projected overall U.S. 2018-19 cotton demand at 18.9 million bales, unchanged from the May forecast but down from the upwardly revised 2017-18 estimate of nearly 19.4 million bales. Exports, which contribute more than 80% of total demand, accounted for the year-to-year decline. Domestic mill use is estimated at 3.4 million bales for both 2017-18 and 2018-19.
Additional export competition is expected from Brazil and Australia, and the escalating U.S.-China trade conflict has raised concerns about cancellations by China of some unshipped old-crop commitments and of 1.45 million bales of U.S. cotton booked for 2018-19.
However, there is talk that the potential impact of any cancellations could be offset or softened by transshipments of U.S. cotton from other overseas consuming countries. The export forecast of 15.5 million bales is 500,000 bales below the estimate for 2017-18, though new-crop bookings of 4.92 million RB are 42% ahead of forward sales a year ago.
If the forecast is achieved, 2018-19 exports would be the third highest on record, linked to prospects for global mill demand to improve to a record 125.4 million bales, nearly 4.6 million bales or 3.8% above 2017-18. The global demand forecast is based on further anticipated growth in the world economy.
World cotton consumption is projected to surpass the prior record of 124.2 million bales set in 2006-07. China and India are the leading cotton consumers, with a combined mill use of 66.7 million bales projected for 2018-19 or 53% of the global estimate.
Certified stocks grew 2,662 bales to 84,976 on Tuesday, the ICE daily report showed. Awaiting review were 1,190 bales at Dallas-Fort Worth. Open interest fell 11,467 bales to 272,846, with July’s down 5,159 lots to 10,536 and December’s down 6,949 lots to 188,865.