World cotton area expected to decline in 2014-15, mostly on a projected drop in China, ICAC says. Average world price forecast for this season raised to 91 cents.
Cotton futures set the range for the session in overnight dealings and settled with a strong gain Tuesday.
Spot March closed up 104 points to 84.67 cents, in the upper quarter of its 158-point range from down 18 points at 83.45 to up 140 points at 85.03 cents. It settled three ticks above its close last Tuesday.
The May contract gained 102 points to 84.63 cents, July rose 80 points to 84.28 cents and December added 32 points to 78.88 cents.
Weakness late last week and a six-session low Sunday night appeared to have generated some fresh business and mill fixations, analysts said, and then an improved technical picture attracted a spec-fund following.
World cotton area is expected to decline in 2014-15, mostly on a projected drop in China, says the International Cotton Advisory Committee.
The secretariat forecast ChinaΆs cotton area at 3.9 million hectares or 9.64 million acres, down about 15% from 4.6 million hectares or 11.37 million acres in 2013-14. Plantings this season were down 8% from 2012-13, ICAC estimated.
This is a much deeper 2014-15 cut than indicated in a Beijing Cotton Outlook survey, results of which this week showed as much as a 9% reduction from 2013-14 to 4.209 million hectares or 10.4 million acres.
The prospective area may change, ICAC pointed out, noting that planting doesnΆt begin until March and the Xinhua News Agency reported last month that trial subsidies for cotton and soybeans may be part of ChinaΆs reforms for agriculture.
Global cotton mill use is expected to continue growing in 2014-15 on the basis of continued recovery in global economic growth. However, ICAC said a small gain in cotton prices could constrain the increase in demand for cotton, particularly if the price of polyester remains low.
Converted from metric tons to 480-pound net weight bales, the ICAC forecasts put world production at 114.09 million bales and consumption at 112.71 million, down 3.5% and up 3.3%, respectively, from this season.
“While the divergence between cotton production and consumption is expected to narrow, there is still a significant supply of cotton and stocks are growing,” ICAC said.
World stocks at the end of this season are estimated at 90.85 million bales, down from 93.33 million foreseen a month ago, with 56% expected to be in China. As of Dec. 27, ChinaΆs reserve held 54.2 million bales.
The global carryout in 2014-15 is projected at 92.18 million bales, 81.7% of consumption. World trade is expected to drop 9% to 35.55 million bales, in large part because of a continuing decline in ChinaΆs imports.
Although ChinaΆs crop is expected to be lower, its consumption also is declining and the government holds enough cotton stocks for a year and a half of mill use without any further imports or production, ICAC said.
For the first time this season, ICAC raised its estimate of the marketing year average world price, hiking it by three cents to 91 cents as measured by the Cotlook A Index. The 2012-13 average was 88 cents.
Futures open interest increased 789 lots Monday to 174,415, with MarchΆs down 304 lots to 111,126 and MayΆs up 429 lots to 34,590. Cert stocks grew 1,930 bales to 36,103.
The Cotlook A Index of world values rose 70 points Tuesday morning to 88.80 cents. The index premium to MondayΆs March futures settlement nudged out a point to 5.17 cents.
