Split Fed sought in July to keep options open on rate hike. Increase generally expected in U.S. weekly export sales. Exports projected at 76% of the U.S. 2016-17 market offtake.
Cotton futures settled on modest gains in subdued dealings Wednesday, snapping a string of three consecutive losing sessions.
Benchmark December gained 21 points to settle at 68.81 cents, finishing in the lower third of its 96-point range from down seven points at 68.53 to up 89 points at 69.49 cents. The prior-day performance to some had smacked of something of a selling climax on hefty volume.
Nearby October closed up 35 points to 68.36 cents, March rose 21 points to 69.30 cents and December 2017 gained 38 points to 68.39 cents.
Volume slowed to an estimated 17,713 lots from 40,819 lots the previous session when spreads accounted for 10,174 lots or 25%, EFP 248 lots and EFS 104 lots. Options volume dropped to 11,862 lots — 8,924 calls and 2,938 puts — from 25,611 lots.
Federal Reserve officials sought to keep their options open at a July policy meeting as they tried to reconcile differences on the economic outlook and when to raise short-term interest rates, Dow Jones Newswires reported shortly before the cotton market close.
Overall, meeting minutes released Wednesday suggested a rate increase is a live possibility as early as September, but the split Fed wonΆt commit to a move until a stronger consensus can be reached about the outlook for growth, hiring and inflation.
Earlier, traders talked of a generally expected increase in U.S. export sales to be reported by USDA at 7:30 a.m. CDT on Thursday for the first full reporting week ended Aug. 11 of the new marketing year.
Net upland sales of 132,000 running bales were registered the first few days of the 2016-17 marketing year, which began Aug. 1, the prior report showed. Early all-cotton commitments stand at 3.621 million RB, 32% of the USDA estimate, including carryover sales of 736,200 RB from 2015-16.
The USDA left its estimate of the U.S. 2016-17 market offtake unchanged at 15.1 million statistical 480-pound bales in its August supply-demand report. This is 2.4 million bales or 19% above the latest estimate for 2015-16 and the highest since 2012-13.
Exports accounted for most of the increase, with sluggish demand for U.S. cotton products expected to limit the growth of domestic mill use, which is up only 100,000 bales from last season to 3.6 million.
With raw cotton supplies projected lower for the worldΆs other major producers, U.S. cotton exports are expected to expand to 11.5 million bales. This is 76% of total offtake, up from 72% last season.
Exports are projected to rise by 2.3 million bales or 25% above 2015-16 shipments to the highest in four seasons. The U.S. share of global cotton trade is forecast to climb to nearly 34% from 26% in 2015-16.
Futures open interest dropped 4,526 lots on Tuesday to 235,463, with DecemberΆs down 4,875 lots to 169,871 and MarchΆs down 97 lots to 43,550. Certificated stocks declined 2,326 bales to 84,078.
