ChinaΆs stockpiling program and the U.S. balance sheet viewed as guiding market forces in 2013-14. MillsΆ unfixed on-call holdings in December outweighed those of producers by a ratio of 1.93:1.
Cotton futures retreated from a test of the prior-day high to a three-session low and settled in the red Friday.
Benchmark December lost 87 points to close at 85.12 cents, in the lower quarter of its 155-point range from up 32 points at 86.31 to down 123 points at 84.76 cents. March closed down 86 points to 83.40 cents.
Concern that the recent collapse in grain prices may spur an increase in cotton acreage in the Southern Hemisphere may have weighed on sentiment. This crop will be part of the 2013-14 production.
For the week, the market shed 115 points in October, 106 points in December and 112 points in March.
Volume increased to an estimated 14,700 lots from 12,531 lots the previous session when spreads accounted for 3,093 lots or 25% and EFP for 20 lots. Options volume slowed to 3,547 calls and 3,437 puts.
Cotton prices will remain driven in the new marketing year by ChinaΆs stockpiling program and low U.S. inventories, Joe Nicosia, executive vice president of Louis Dreyfus Commodities LLC, said on the Ag Market NetworkΆs conference call.
ChinaΆs current reserve-building program is unsustainable, he said at the networkΆs annual program in New York. ThereΆs a good chance that ChinaΆs cotton policy may be changed in 2014-15, he said.
A lot of conjecture has circulated following recent international conferences in China and New York that China may shift at some point to a program featuring a direct cotton subsidy.
U.S. cotton will have a competitive advantage for the next 30 to 60 days ahead of IndiaΆs crop coming to market, Nicosia said.
The USDA earlier this month raised its production forecast for India, the worldΆs second largest producer, by a million bales on the month to 28 million. It also upped IndiaΆs imports by 200,000 bales to 1.2 million, left domestic use at 23.25 million bales, hiked exports 100,000 bales to 5.8 million and raised the carryout 1.15 million bales to 8.39 million.
Carl Anderson, professor emeritus at Texas A&M University and AgriLife Extension cotton economist, said on the conference call he expects a third of the planted cotton acres in Texas will be abandoned.
Meanwhile, unfixed on-call mill holdings fell 1,817 lots — including revisions submitted from the week before — to 28,464 lots in December 2013 last week, according to the Commodity Futures Trading Commission.
Producers added 280 lots to nudge their unfixed position up to 14,774 lots. The net call difference with the adjustments fell 2,097 lots to 13,690, which was 9.63% of the rising open interest, down from 11.33% originally reported a week earlier.
Based on the revised data, the unfixed mill position outweighed the open position of producers by a ratio of 1.93:1. The unadjusted ratio the previous week was 2.1:1.
Mills added 334 lots in March, 164 lots in May, 665 lots in July and 105 lots in December 2014, while the only other activity by producers beyond December 2013 included additions of 15 lots in May and eight lots in December 2014.
Futures open interest expanded 2,206 lots Thursday to 167,241, with DecemberΆs up 1,720 lots to 144,393 and MarchΆs up 474 lots to 15,937.
Certificated stocks fell 73,667 bales to 160,216, a new low since early February. No cotton awaited review.
World values as measured by the Cotlook A Index gained 25 points Friday morning to 93.45 cents. The premium to ThursdayΆs December futures settlement was unchanged at 7.46 cents. For the week, the world price barometer gained 130 points.
