Mill fixations and trade buying underpinned the rally ahead of the delayed export sales-shipments report. Physical supplies expected to remain tight until at least November.
Cotton futures settled higher Thursday, snapping strings of four straight losing sessions in spot July and 12 in a row in December.
July surged 128 points to settle at 86.15 cents, in the upper third of its 242-point range from down 35 points at 84.52 to up 207 points at 86.94 cents. It closed back above a 50% retracement (85.57) of the rally from the November low to the March high on a continuous chart.
December gained 66 points to settle at 78.38 cents, in the upper quarter of its 126-point range from down 37 points at 77.35 to up 89 points at 78.61 cents.
The inverted July-December straddle widened 62 points to a settlement difference of 777 points, widest since May 14.
Volume rose to an estimated 29,300 lots from 27,352 lots the previous session when spreads totaled 9,395 lots or 34%, EFP 759 lots and EFS 35 lots. Options volume totaled 7,029 calls and 5,694 puts.
Mill fixations and trade buying against scant fresh selling in a technically oversold market offered support, enticing some short-covering ahead a report on U.S. export sales-shipments for the week ended May 22. The report, usually released on Thursdays, has been delayed by the Monday holiday until 7:30 a.m. CDT on Friday.
Forecasts for heavy rains on the Texas High Plains over the Memorial Day weekend — which subsequently were fulfilled — appeared to have overshadowed robust sales and strong shipments reported last week.
Net upland sales for the week ended May 15 beat expectations by a wide margin at 358,300 running bales for delivery this season and 158,400 RB for next season for a combined total of 506,700 bales. Upland shipments fell 11% from the previous four-week average to 190,000 bales, still above the weekly average needed to reach the USDA estimate.
Eighteen markets bought U.S. cotton for shipment this season, with China booking 269,300 bales or 75%.
U.S. cotton supplies this season are estimated at a 29-year low at 16.82 million bales, total market offtake at a 25-year low at 14 million bales and ending stocks at the smallest since 2010-11 at 2.8 million bales, the second lowest carryover since 1995-96. Physical supplies are expected to remain tight until at least November.
Futures open interest dropped 242 lots to 187,204, with JulyΆs down 1,298 lots to 102,092 and DecemberΆs up 481 lots to 74,062. Certificated stocks declined 2,275 bales to 420,669. There were 4,396 newly certified bales, 6,671 bales decertified and 4,100 bales awaiting review.
World values as measured by the Cotlook A Index eased 10 points Thursday morning to 89.40 cents. The premium to WednesdayΆs July futures settlement was unchanged at 4.53 cents.
Forward A Index values for 2014-15 held steady at 85.90 cents, narrowing the discount to the 2013-14 index by 10 points to 3.50 cents and widening the premium to WednesdayΆs December futures close by 14 points to 8.18 cents.
