Current-Crop Cotton Closes Marginally Lower

Traders digested USDA report showing U.S. crop prospects declined slightly, resulting in a reduction in ending stocks, while the world carryout rose amid an upward revision in the beginning inventory.

Cotton futures closed marginally lower in current-crop contracts Friday as traders digested USDA supply-demand estimates featuring a slight cut in U.S. crop prospects and higher world beginning and ending stocks.

Spot December settled off 11 points to 61.61 cents, smack in the middle of its 127-point range from up 52 points at 62.24 to down 75 points at 60.97 cents. March closed down seven ticks to 61.53 cents, while December 2016 gained 18 points to finish at 62.45 cents.

For the week, spot December gained 147 points, March 157 points and December 2016 167 points.

Volume increased to an estimated 28,900 lots from 18,407 lots the previous session when spreads accounted for 6,818 lots or 37% and EFP 100 lots. Options volume rose to 2,755 calls and 4,270 puts.

U.S. all-cotton production is forecast at 13.338 million bales, down 90,000 bales or less than 1% from the September projection and down 18% from last yearΆs output, USDA reported. Analysts had expected a slight increase from last month.

Yields are expected to average 784 pounds per harvested acre, five pounds below the September forecast, down 54 pounds from last year and down 45 pounds from the five-year average. Planted area and acres for harvest estimates were unchanged from last month.

Upland cotton production is forecast at 12.887 million bales, down from 12.977 million projected in September and 16.319 million last season. The Pima or extra-long staple cotton production forecast of 451,000 bales was carried forward from last month.

The biggest state changes were offsetting in Texas and Georgia where the crop estimates fell on the month by 100,000 bales to 5.962 million and rose by 100,000 bales to 2.3 million bales, respectively. The crop estimate for South Carolina dropped 35,000 bales to 385,000.

By regions, upland production estimates rose by 60,000 bales to 4.265 million in the Southeast, declined 60,000 bales to 2.16 million in the Mid-South, dropped 100,000 bales to 5.962 million in the Southwest and increased 10,000 bales to 500,000 in the West.

U.S. export and domestic mill use were unchanged at 10.2 million bales and 3.7 million bales, respectively. Ending stocks were cut 100,000 bales to 3.1 million, down from last seasonΆs 3.7 million. Stocks are forecast at 22.3% of total use, down from 23% in 2014-15.

The marketing year average price received producers is forecast to range from 54 to 64 cents. The midpoint of 59 cents is down from 62 cents foreseen last month and 60.50 cents last season. Relatively weak demand for yarn and lower prices for polyester are pressuring world cotton prices, USDA said.

Globally, beginning stocks rose by 880,000 bales to 111.79 million, production declined 1.36 million bales to 107.38 million, consumption slid 1.17 million bales to 112.27 million and ending stocks increased 710,000 bales to 106.97 million.

The estimate of beginning stocks reflected mainly a million-bale reduction to 33 million in ChinaΆs 2014-15 consumption. ChinaΆs net cotton textile exports were lower than previously expected, USDA said.

Production for 2015-16 was reduced for China, Pakistan and Brazil but raised for Mali. Consumption was reduced mainly in China, Pakistan and India. World trade was virtually unchanged from last month at 34.2 million bales.

ChinaΆs ending stocks rose by 650,000 bales to 64.62 million, 61% of the projected world carryover. Stocks in the rest of the world outside China are expected to end this season at 41.7 million bales, down 2.17 million bales from the October estimate of beginning stocks.

Futures open interest edged up 46 lots Thursday to 189,645, with DecemberΆs down 962 lots to 120,104 and MarchΆs up 810 lots to 50,099. Cert stocks declined 526 bales on 180 newly certified bales and 706 decertified bales.