Cotton Hits Seven-Session Intraday High

The U.S. dollar index slipped ahead of the U.S. jobs report. IndiaΆs crop estimated by CAI at a converted 29.5 million 480-pound bales, up from USDAΆs September forecast of 29 million.

Cotton futures climbed to a seven-session intraday high in benchmark December and settled in the upper half of a narrow trading range on thin volume Tuesday.

December closed up 25 points to 61 cents, back above its nine-day moving average for the first time since September 11. It traded within a 70-point range from down 20 points at 60.55 to up 50 points at 61.25 cents, just above an old contract low at 61.20 set on August 12.

March settled up 30 points to 60.71 cents, while December 2016 edged up 28 points to 61.24 cents.

Support may have stemmed partly from a weaker U.S. dollar index as traders awaited clearer signals on the U.S. economy and interest rates, notably from the monthly jobs report on Friday.

Volume dwindled to an estimated 10,978 lots from 11,698 lots the previous session when spreads accounted for 2,610 lots or 22%, EFP 220 lots and EFS 186 lots. Options volume totaled 2,441 calls and 1,599 puts.

Open interest grew 1,483 lots Monday to 184,804, with DecemberΆs up 766 lots to 121,247 and MarchΆs up 631 lots to 47,083. Certificated stocks declined 88 bales to 45,817.

On the international scene, India, expected to surpass China as the worldΆs largest cotton producer in 2015-16, is projected to harvest 37.7 million bales of 170 kilograms, according to new estimates by the Cotton Association of India.

This converts to 29.45 million 480-pound net weight bales, compared with USDAΆs September forecast of 29 million bales. The USDA estimated the 2014-15 output at 29.5 million bales.

IndiaΆs ascension to the worldΆs leading producer results largely from having the largest cotton area, according to USDA. Harvested area in India is expected to account for nearly 38% of the global total in 2015-16 and is more than three times that of either China or the United States.

Yields in India remain well below the world average. Yet USDAΆs estimate of IndiaΆs production is 27% of the agencyΆs forecast of the global crop.

India surpassed the United States in cotton production in 2006-07 and is poised this season to overtake ChinaΆs 26-million bale crop, which is down from 30 million bales in 2014-16. ChinaΆs cotton area has declined for the fourth consecutive year.

The three largest cotton-producing countries — India, China and the United States — are expected to account for 63% of USDAΆs estimate of world production, slightly below last seasonΆs share.

World production is forecast by USDA at 108.74 million bales, nearly 9% below the prior-year crop and the lowest since 2009-10. This is 15% (18.7 million bales) below the 2011-12 record.

The global harvested area is expected to decline 7.5% to 31.3 million hectares (77.3 million acres), largely owing to smaller acreages in the big three.

IndiaΆs cotton area is projected at 11.8 million hectares or 29.2 million acres, down 7% from the 2014-15 record of 12.7 million hectares or 31.3 million acres, and one of the lowest of the last five years. But USDA expected a rebound in yield to keep the crop only slightly below 2014-15 production.