By Duane Howell
For A-J Media

Bearish supply-demand estimates, deteriorating technical factors and intensified concerns about the global economy have pushed cotton futures to new contract lows in heavy trading.

March fell 181 points during the week ended Thursday to settle at 58.42 cents, lowest spot futures close since Jan. 23, 2015. It posted a contract low at 57.85 cents, approaching the 2015 low of 57.05 cents, and closed lower six of the last seven sessions.

May — its open interest topped MarchΆs for the first time — shed 199 points to settle at 58.71 cents. July lost 196 points to finish at 59.31 cents and December fell 168 points to 59.58 cents.

Daily volumes surged as high as 74,454 lots, largest since November 2014, and spreads had accounted for up to 61 percent. The March-May switch traded 19,836 lots on Thursday, swelled by index fund rolls ahead of March options expiry the next day and first notice day on Feb. 23. By midweek, open interest had risen by 5,132 lots from a week ago to 205,133.

Cash online grower sales declined to 13,583 bales from 47,067 bales on The Seam. Prices fell to an average of 53.20 cents from 56.92 cents, reflecting a drop to 6.48 cents from 9.75 cents in premiums over loan repayment rates. Daily average prices ranged from 51.42 to 54.20 cents.

Continued sluggish export sales, attributed to sharply lower imports by China and U.S. crop quality concerns, resulted in USDA slashing its U.S. export estimate by a larger-than-expected 500,000 bales from a month ago to 9.5 million. This raised ending stocks in USDAΆs supply-demand estimates by a corresponding amount to 3.6 million.

Production and domestic mill use estimates were unchanged, as expected, at 12.94 million bales and 3.6 million bales, respectively.

The export estimate was the same as an earlier projection by National Cotton Council economists in an outlook report at the annual industrywide meeting last weekend in Dallas. Declining prices cast a shadow over the councilΆs early survey showing U.S. growers intent to plant cotton on 9.109 million acres, up 6.2 percent from 2015.

Ending stocks now are projected by USDA at 27.5 percent of total market offtake, compared with 22.8 percent forecast a month ago, 25 percent last season and 16.7 percent in 2013-14.

The USDA raised the lower end of the projected range for the crop-year average price received by producers by a cent on the lower end, now 58 to 61 cents per pound, with the midpoint at 59.50 cents. Producer prices averaged 61.30 cents last season and 77.90 cents two years ago.

Globally, USDA shaved production by just 180,000 bales to 101.38 million, reduced consumption by 1.34 million bales to 109.60 million, cut cotton trade by nearly a million bales to 35.1 million and raised ending stocks by 1.22 million bales to 104.08 million.

A much deeper cut in production and much smaller reduction in consumption had been expected. Stocks are forecast at 95 percent of consumption, compared with 92.7 percent foreseen in January and 101.7 percent last season.

Compared with projections made at USDAΆs Outlook Forum in February 2015, world consumption forecasts deteriorated from a growth rate of 4.2 percent over the prior year to a minus 0.6 percent.

This was reported by USDAΆs Foreign Agricultural Service, which said the vast bulk of that change stemmed from declines in cotton use estimates in China, the worldΆs largest cotton consumer, where consumption is forecast down 5.5 million bales from last February to 32 million.

Outside China, consumption forecasts have fallen fewer than a million bales since the February forum, and indeed USDA continues to forecast 0.4 percent growth from the prior year for the world less China.

“The worsening outlook for Chinese cotton use stems from low state reserve sales, continuing import restrictions, declining polyester prices and a weakening outlook for Chinese economic activity,” FAS said.

China has fallen into third place in the world rankings of cotton importers, behind Bangladesh and Vietnam. The import forecast for China is 5 million bales, down 500,000 bales from a month ago.

ChinaΆs imports have plunged from 24.53 million bales in 2011-12 when a cotton subsidy program, since scrapped, left internal prices far above international values and encouraged mills to buy foreign growths.

Cotton stocks in China are estimated at 64.52 million bales, 200.4 percent of the projected total offtake and 62 percent of world stocks now forecast at the second largest on record.

Forecasts since last February have deteriorated even more for world production than for consumption. Despite worsening consumption forecasts, the production decline implies that “destocking” has continued at an even faster rate than initially forecast, FAS said. Global stocks are forecast to tighten by 8.1 million bales rather than 3 million.

The market shrugged off solid all-cotton export sales of 240,800 running bales during the week ended Feb. 4 for shipment this season. This brought 2015-16 commitments to 6.331 million RB.

The gap behind year-ago commitments narrowed to 3.328 RB and amounted to 69 percent of USDAΆs revised February forecast. A year ago, commitments were 89 percent of final 2014-15 shipments.

Shipments of 195,500 RB hiked the seasonΆs total to 3.272 million RB, down 582,000 from a year ago. Exports were 35 percent of the forecast, about the same as the year-ago percentage of final 2014-15 exports.

Weekly shipments averaging roughly 237,700 RB would achieve the estimate, while sales of about 115,400 RB would match the export forecast.

Sales for next season of 53,700 RB raised 2016-17 commitments to 888,600 RB, widening the lead over forward sales a year ago to 227,000 RB.

Meanwhile, trend-following funds reduced their net longs by 3,806 lots to 14,749 in cotton futures-options combined during the week ended Feb. 2. Index funds raised their net longs by 2,499 lots to 58,875, while nonreportable traders shaved their net shorts by 190 lots to 1,471. Commercials chopped their net shorts by 1,118 lots to 72,152.