World ending stocks outside China projected to fall to 38.34 million bales, smallest since 2009-10. Yarn exports spurred big growth in Vietnam cotton spinning. Improved weekly export sales expected.

U.S. cotton futures settled higher for a third day Wednesday, led by spot March on a six-session high finish.

• March closed up 55 points to 62.14 cents, back above its declining nine-day moving average and in the upper third of its 93-point range from down nine points at 61.50 — where it opened overnight — to up 84 points at 62.43. It traded to within 39 points of May, narrowest since Oct. 22, and closed at 46 points carry, even with Monday’s settlement difference.
• May settled up 44 points to 62.60 cents, while December gained 23 points to close at 63.09 cents.
• Volume slowed to an estimated 25,025 lots from 30,535 lots the previous session when spreads accounted for 13,630 lots or 45%, EFS 182 lots and EFP 162 lots. Options volume totaled 2,055 calls and 1,001 puts.

A decline in estimated world ending stocks outside China drew considerable attention in USDAΆs supply-demand reports this week.

Stocks in the rest of the world are expected to fall to 38.34 million bales, a drawdown of 5.81 million bales from beginning stocks and the smallest such carryover since 2009-10.

The stocks-to-use ratio outside China is projected to fall to a multi-year low to 48.8% from 57.1% in 2014-15. Mill use in the rest of the world is expected to grow 1.4% to 77.44 million bales, with global growth projected at 0.49% to 110.94 million bales.

Cotton spinning in Vietnam has more than tripled in the last four years, with total use forecast at 5.1 million bales in 2015-16, USDAΆs Foreign Agricultural Service said in a report on world markets and trade.

Vietnam accounted for half the total world growth in cotton demand during that period. Rising yarn exports have been the main source of this rapid expansion in mill use. Net yarn exports increased at an annual rate of more than 40% from 2011-12 to 2015-16.

China was the largest market for Vietnam yarn exports even before 2011-12, and its share of VietnamΆs exports has expanded further the last few years to now about 80% to 90%.

This growth is paralleled by a large rise in Chinese investment in yarn spinning in Vietnam alongside wholesale relocations of some firms. The key driver of this trend has been ChinaΆs domestic cotton policy, which has elevated the internal price of cotton enough to render many spinning operations unprofitable.

Cotton consumption for VietnamΆs domestic yarn utilization also has shown impressive growth, more than doubling since 2011-12. Thus, even as more yarn is being exported to China, VietnamΆs role further up the textile value chain also is growing.

Meanwhile, improved U.S. upland export sales are expected in the USDA report set for release on Thursday for the week ended Jan. 7. Net upland sales the prior week were 82,800 running bales, a five-week low. Some estimates have ranged mostly from 150,000 to 175,000 RB. Both sales and shipments have lagged the pace needed to achieve the USDA export estimate.

Futures open interest fell 1,063 lots Tuesday to 182,594, with MarchΆs down 2,388 lots to 115,182 and MayΆs up 288 lots to 32,141. Cert stocks were unchanged at 64,142 bales. Awaiting review were 88 bales at Galveston.