Cotton Ekes Out Slight March Gain
Fed says it will cut bond purchases by $10 billion a month. New-home building surged in November. Slower weekly export sales expected.
Cotton futures traded within a tight range and settled narrowly ahead Wednesday, a day after reversing from a new rally high since October to finish with a modest loss for the first time in six sessions.
Spot March eked out a five-point gain to close at 83 cents, in the upper quarter of its a 70-point range from down 45 points at 82.50 to up 25 points at 83.20 cents.
The May contract edged up 11 points to 82.76 cents, July gained 37 points to 82.45 cents and December rose 52 points to 77.21 cents. That was the highest new-crop December close since Nov. 13 when it settled at precisely the same price.
Volume increased to an estimated 13,900 lots from 12,259 lots the previous session when spreads totaled 2,774 lots or 23%, EFP 51 lots and EFS 31 lots. Options volume totaled 2,452 calls and 1,866 puts.
The Federal Reserve said it would reduce its signature bond-buying program to $75 billion per month, taking a step away from a policy meant to recharge economic growth, and said that it will continue in “further measured steps at future meetings” if the economy stays on course, Dow Jones Newswires reported.
This is a reduction of $10 billion a month. Equities initially slumped, then soared. News of the Fed action, described as a modest move, came about 30 minutes before the end of trading in cotton futures, which already had set the dayΆs price range.
Earlier in the day, data showed U.S. new-home construction surged in November to its highest level in nearly six years.
Housing starts rose 22.7% from October to a seasonally adjusted annual rate of 1.091 million, the Commerce Department said. That was higher than the 952,000 forecast by economists and brought the average pace of starts for the last three months to 951,000.
This news followed a report from the National Association of Home Builders that said members of the industry trade group are seeing a surge in demand from buyers in December. The groupΆs confidence gauge rose to 58 from 54 last month. Levels over 50 indicate expansion.
A healthy housing industry sends positive ripples throughout the economy, stimulating job creation and demand for a broad array of materials and household goods, including cotton products. People who buy new homes also tend to buy cotton goods to go in their new abodes.
Home furnishings formed an important component of the National Cotton CouncilΆs “Cotton Counts Its Customers” market research report, which had been published since 1939 until it was discontinued a few years ago.
A new NCC publication — “Cotton Counts Its Trade” — now contains annual estimates of the quantities of cotton imported into and exported from the United States expressed in 480-pound bale equivalents.
Meanwhile, slower weekly export sales are expected to be reported by USDA on Thursday. The report will be for the week ended Dec. 12, a period in which March futures closes ranged from 80.36 to 83.06 cents.
Net U.S. export sales have been running at a healthy pace but have slowed four weeks in a row. Sales averaged 248,390 running bales of upland and 259,730 bales of all cotton for the four-week period through Dec. 5.
Futures open interest eased down eight lots Tuesday to 165,164, with MarchΆs down 666 lots to 109,880 and MayΆs up 533 lots to 31,638. Cert stocks declined 6,686 bales to 41,686.
World values as measured by the Cotlook A Index fell 70 points Wednesday morning to 88.15 cents. The premium to TuesdayΆs March futures settlement narrowed 27 points to 5.20 cents.
