Fed will reduce bond purchases by $10 billion per month, as expected. Sharp decrease expected in U.S. weekly export sales. Cert stocks jumped to 136,657 bales.
Cotton futures rallied from a shallow dip to close with strong current-crop gains Wednesday in the face of macro concerns that rising borrowing costs in emerging markets may damp economic growth.
Spot March gained 120 points to close at a three-session high finish at 85.55 cents, in the upper half of its 261-point range from down 35 points at 84 cents to up 226 points at 86.61 cents. It continued to find trade support in the 84-cent area.
May closed up 139 points to 86.24 cents, widening its premium over March, while July gained 137 points to 86.30 cents and December eased nine points to 76.82 cents.
The South Africa Reserve Bank increased its benchmark interest rate following similar action by central banks from Turkey to Brazil. Countries tightened monetary policy to bolster their currencies.
Index funds are expected to begin rolling cotton positions from March into May on Thursday. Mills had 20,400 lots of unfixed on-call sales based in March as of Jan. 17 and the net call difference was 15,082 lots.
Volume rose to an estimated 30,500 lots from 21,010 lots the prior day when spreads totaled 8,096 lots or 39%, block trades 434 lots, EFP 653 lots and EFS 40 lots. Options volume totaled 2,555 calls and 2,380 puts.
Late in the cotton session, U.S. stock market indexes initially pared losses and then extended their declines after the Federal Reserve announced a further reduction in its monthly bond purchases, as expected. March pared gains a bit.
The Fed said in a statement it would trim its bond purchases to $65 billion per month in February from $75 billion in January. Officials offered a mixed assessment of the economyΆs performance.
Meanwhile, a sharp decrease is expected in U.S. weekly export sales for the week ended Jan. 23 from crop year high registrations the previous week of 496,500 running bales of upland and 504,800 bales of all cotton for shipment this season.
The USDA report is scheduled for release at 7:30 a.m. CST Thursday. Prices during the reporting week ranged from 85.89 to a five-month high of 88.43 cents, basis March, and settlements from 86.80 to 88.13 cents.
Net upland sales during the previous four reporting weeks, which encompassed the Christmas and New Year holidays, totaled 874,200 running bales for an average of 218,550 bales a week.
The sales pace has bolstered expectations that ending stocks may tighten further from USDAΆs January forecast of 3 million bales, down 900,000 bales from the beginning inventory, the smallest since 2010-11 and the third lowest since 1995-96.
Some uncertainty has arisen on the crop size, but USDA isnΆt expected to adjust its January production estimate until April when revisions will be based on end-of-season ginning figures to be released March 25. Then the 2013 crop figures will be tweaked further in the final tally in May.
Futures open interest fell 1,151 lots Tuesday to 184,638, with MarchΆs down 2,341 lots to 101,810 and MayΆs up 459 lots to 41,852.
Certificated stocks jumped 60,582 bales to 136,657 on 60,667 newly certified bales and decertification of 85 bales. The new certifications included 16,329 bales at Dallas-Fort Worth, 477 bales at Galveston and 43,861 bales at Memphis. Awaiting review were 4,280 bales at Greenville.
The Cotlook A Index of world values held steady Wednesday morning at 91.05 cents. The index premium to TuesdayΆs March futures settlement narrowed 10 points to 6.70 cents.
