December 2017 hit new contract high. Higher U.S. exports countered a million-bale increase in crop prospects, with 2016-17 beginning and ending stocks revised down. World production shortfall widened.
Cotton futures soared to 300-point limit gains and closed there in all 2016-17 contracts on huge volume Tuesday on the heels of bullish USDA supply-demand projections.
December finished up 4.4% at 70.78 cents, highest since September 2014, and March closed at 70.84 cents. Nearby OctoberΆs close at 71.14 cents also was the highest on the daily spot continuous chart since September 2014.
Deferred contracts also roared ahead, with December 2017 closing up 276 points to 71.11 cents. It posted a new contract high at 71.35 cents.
Volume leaped to an estimated 54,236 lots from 36,655 lots the previous session when spreads accounted for 21% and EFP 18 lots. Options volume totaled 11,109 calls and 9,631 puts.
Higher U.S. exports countered a million-bale increase to 15.8 million bales in U.S. 2016-17 production prospects from a month ago, with both beginning and ending stocks revised down.
The increased production is attributable mainly to higher planted area as indicated in the June 30 acreage report, USDA said, combined with slightly more favorable assumptions about abandonment and yield based on current conditions.
Export prospects jumped a million bales to 11.5 million on the larger U.S. supply and an expectation of continued tight foreign stocks. The domestic mill use estimate remained at 3.6 million bales.
The USDA projected an area for harvest of 9.3 million acres, reflecting an abandonment of 720,000 acres or 7.2% off plantings of 10.02 million acres. Yields are forecast at 815 pounds per harvested acre, up from 766 pounds in 2015 but below the five-year average of 829 pounds.
The projected range of 52 to 66 cents for the average 2016-17 marketing year price received by producers was raised five cents on the lower end and reduced a cent on the upper end, with the midpoint of 59 cents up 2 cents from last month.
Ending stocks fell 200,000 bales on the month to 4.6 million for 2016-17 and also dropped 200,000 bales to 3.9 million for 2015-16. The estimate for this season is linked to a 200,000-bale hike to 9.2 million in exports.
Globally, a combination of modestly lower production and significantly higher consumption led to reductions in the monthΆs ending stocks forecasts for both 2015-16 and 2016-17.
World beginning stocks for 2016-17 fell 1.81 million bales to 100.27 million owing to a sharp increase of 1.5 million bales to 34 million in ChinaΆs estimated 2015-16 consumption.
Recent strong demand for the governmentΆs reserve sales indicates that ChinaΆs mills are consuming more cotton than previously estimated. A parallel increase boosted ChinaΆs 2016-17 mill use to 35 million bales.
World consumption rose by 1.01 million bales to 111.6 million for 2016-17 and 1.42 million bales to 110.20 million for 2015-16. With production down 620,000 bales to 102.55 million for 2016-17 and 230,000 bales to 97.92 million for 2015-16, the crop shortfalls are estimated at 9.05 million bales and 12.28 million bales, respectively.
Despite the boost in prospective U.S. production, the world output for 2016-17 was reduced on mainly lower expectations for planted areas in India and Pakistan. Production for 2016-17 was raised by 200,000 bales to 2.8 million for Australia but lowered for Greece and Uzbekistan.
Smaller foreign crops are expected to boost 2016-17 world imports and reduce exports from levels foreseen a month ago, especially for Pakistan, where estimated production fell a million bales to 8 million and projected imports rose by 700,000 bales to 2.4 million.
Futures open interest jumped 9,812 lots Monday to 197,928, with DecemberΆs up 8,714 lots to 160,407 and MarchΆs up 835 lots to 22,197. Certified stocks declined 88 bales to 133,524.
