Growth rate for global cotton consumption revised down to 1.7% from previous estimates of 2.5% but up from 1.3% estimated for 2014-15.
Cotton futures finished mixed Wednesday, with benchmark December trading on both sides of the prior day’s range and closing with a modest gain just above the midpoint of the still-narrow price span.
- December settled up 19 points to 62.71 cents, trading within a 64-point range from up 41 points at 62.93 to down 23 points at 62.29 cents. It remained within FridayΆs expanded range and in the lower reaches of the four-week trading band.
- Thinly traded October lost its premium to December, settling off 44 points to 62.38 cents, and March eked up three ticks to 62.42 cents.
- Volume slowed to an estimated 12,800 lots from 13,967 lots the previous session when spreads accounted for 27% and EFP 27 lots. Options volume totaled 1,766 calls and 6,067 puts.
Cotton traders appear nervous about a Federal Reserve decision to be announced Thursday on whether to raise interest rates for the first time in nearly a decade. Some analysts say a raise would mean a stronger U.S. dollar and more money might drain from emerging markets, with currency fluctuations adversely affecting cotton prices.
Meanwhile, weak consumer demand prompted USDA to revise its projected growth rate for global 2015-16 cotton consumption downward this month to 1.7% from previous estimates of 2.5%.
The substantially reduced forecast nonetheless remains an acceleration from the 1.3% growth in 2014-15, USDAΆs Foreign Agricultural Service pointed out in a circular on world markets and trade.
South and Southeast Asia continues to exhibit stronger growth at 3.9% than the world average, though well below last seasonΆs 5.6%. This growth rate reduction is most notable in Indonesia, India and Thailand.
Other regions are expected to trim previous yearsΆ losses, most notably in North and South America, where steep declines overall are expected to slow to 1.0% from 5.5%, and some countries — such as the United States — are forecast to experience growth.
U.S. mill use of 3.7 million bales, unchanged from last month, is up 3.5% from a slight upward revision in the consumption estimate for 2014-15, which rose by 0.85% from the prior year.
Consumption in East Asia is forecast flat after a 1.5% decline last year, with Chinese mill use projected unchanged at 34 million bales, 30% of the world total. Mill use in Europe and the former Soviet Union is expected to grow 1.0%, down from 1.8%, while consumption in Africa and the Middle East is projected to rise 0.4% from a 1.0% drop.
Accumulating yarn stocks, reduced yarn margins and uncertainties regarding income growth in developing countries are indicative of the challenges facing global cotton consumption, FAS says. However, it adds, world macroeconomic indicators are still positive.
Raw cotton prices stabilized in 2014-15 from the preceding period of high and volatile prices, and relative to polyester prices. Renewed price stability and continuing global surpluses imply no-less-favorable conditions for spinners in 2015-16 than in 2014-15, FAS says.
For those reasons, USDA expects world consumption growth to exceed last seasonΆs estimated rate.
Futures open interest fell 1,033 lots Tuesday to 177,418, with DecemberΆs down 1,145 lots to 118,909 and MarchΆs up 98 lots to 44,870. Cert stocks declined 1,516 bales to 55,907.
