Most Fed officials last month expected conditions to be ripe for a December rate hike. Traders awaited the U.S. weekly export sales report. World May contract closed at 71.42 cents.
U.S. cotton futures settled modestly higher in most contracts Wednesday as volume slowed and trading ranges again tightened.
- Most-active March settled up 27 points to 62.94 cents, just above the midpoint of its mere 46-point trading band from down a point at 62.66 to up 45 points at 63.12 cents. It traded inside the prior-day range for the second straight session.
- Soon-to-mature December closed down a point to 61.52 cents as its discount to March continued to widen.
Traders late in the session noted reports that most Federal Reserve officials indicated at their last policy meeting that conditions for a short-term interest rate hike “could well be met by the time” of their December meeting. That was revealed in minutes of the October meeting released after the regular three-week lag.
The Fed also was reported to have debated evidence that the U.S. economy’s long-term potential may have permanently shifted lower.
Volume slowed to an estimated 22,455 lots from 38,037 lots the previous session when spreads accounted for 15,569 lots or 41%, block trades 4,294 lots, EFP 2,764 lots and EFS 119 lots. Options volume totaled 7,718 calls and 1,852 puts.
Traders looked ahead to the U.S. weekly export sales-shipments report, set for release by USDA at 7:30 a.m. CST on Thursday. Some traders expect a slight slowing of sales from the 127,900 running bales of upland reported for the week ended Nov. 5.
Upland sales the last four reporting weeks have totaled 363,954 running bales for an average of 90,989 RB and upland shipments have totaled 448,164 RB for an average of 112,041.
U.S. futures open interest declined 5,888 bales Tuesday to 176,397, with DecemberΆs down 7,921 lots to 12,711 and MarchΆs up 1,319 lots to 126,323. Only two trading sessions now remain before first notice day for December deliveries.
Certificated stocks grew 1,639 bales to 54,847 bales. There were 3,614 newly certified bales, 1,975 decertified bales and 2,900 bales awaiting review.
Included in the U.S. cert stocks are 15,704 bales which also are eligible for delivery on the new world cotton futures contract. All the world cert stocks currently are at U.S. delivery points.
Cotton grown in Australia, Brazil, India and several West African countries also is eligible for delivery on the world contract, with the U.S. as par and a pre-set premium or discount for each other origin. Only U.S. cotton is deliverable on the U.S. or No. 2 contract.
Quality specifications for the world contract are similar to those required for inclusion in the Cotlook A Index. Both have a base grade and staple requirement of middling 1-1/8th inches, compared with strict low middling 1-1/16th inches for the U.S. futures contract.
Base delivery points for the world contract are in Malaysia and Taiwan, with preset discounts for delivery in Australia and the United States. The geographical basis of the quotations used in the A Index is the Far East.
The first world contract is May 2016, which settled Wednesday at 71.42 cents, up 12 points, representing a 777-point premium over the U.S. May delivery. Open interest Tuesday was 268 lots, including 259 in May and nine in July. Only one lot traded Tuesday after a turnover of 72 lots on Monday.
