A long-awaited technical correction of overbought readings amid slack short-term demand and some profit-taking has trimmed a strong advance from December lows in cotton futures.
Spot March lost 258 points for week ended Thursday to close at 95.59 cents, with much of Asia participating in weeklong Lunar New Year celebrations and contributing to quiet physical inquiries. New-crop December shed 98 points to 94.25 cents.
Spread trading accounted for up to 65 percent of the daily volumes. This featured rolling from March to deferred deliveries. The March-May spread went from an 18-point closing premium on March a week ago to a 45-point premium on May. First notice day for March deliveries is Feb. 23.
March matched on Tuesday its January high of 99.47 cents, up 17.9 percent from the December low, and formed what some saw as a possible double top. Then it fell to 94.59 cents on Wednesday, lowest print since lows of 94.52 and 94.13 on Jan. 13-12, and closed Thursday below its 18-day moving average for the first time since Dec. 27.
Cash trading slowed to 43,970 bales from 60,644 bales the previous week on The SeamΆs grower-to-business exchange. The cotton changed hands on prices averaging 87.29 cents, little changed from 87.35 cents, and premiums of 34.27 cents over loan repayment rates. Daily average prices ranged between 78.76 and 89.01 cents.
Weak U.S. export sales may have weighed on sentiment, though the market initially showed little interest in the USDA report. Net upland sales were zero for the week ended Jan. 19, with gross sales of 68,500 running bales offset by increased cancellations, while Pima sales hit a crop year high of 49,500 bales.
All-cotton shipments of 217,800 running bales boosted exports for the season to 3.466 million. This is about 33 percent of USDAΆs export forecast. A year ago, shipments had reached about 38 percent of final exports. Shipments need to average roughly 265,800 running bales a week to reach the estimate.
On the crop scene, U.S. all-cotton ginned through mid-January reached 14.468 million running bales, USDA reported, down nearly 16 percent from 17.138 million processed through the corresponding period last season.
The USDA earlier this month estimated the crop at 15.67 million statistical 480-pound bales, down 13.4 percent from last seasonΆs 18.1 million bales.
Some analysts figured the ginning data indicated the crop is likely to come in about 250,000 to 300,000 bales below USDAΆs estimate. Fast-paced harvesting has facilitated ginning and classing of the 2011 crop. In statistical bales of 14.9 million, gins had processed about 95 percent of the estimated output, compared with about 98 percent of the final 2010 production, 96 percent of the 2009 crop and 97 percent in 2008.
Reports for the week ended Jan. 19 indicated ginning had neared completion in Georgia, while most remaining fields had been harvested in Kansas and Oklahoma and modules had been moved to gin yards. Some gins in West Texas had reopened earlier this month to process recently harvested cotton.
Ginning continued in parts of Arizona, New Mexico and the El Paso area, while roller ginning continued in the San Joaquin Valley. The Visalia classing office continued a two-shift operation.
Classing of cotton from Arkansas, Louisiana, Missouri, Tennessee and Virginia has been completed, an analyst said, and has neared completion on crops from Florida, Kansas, Mississippi and North Carolina.
On the international scene, IndiaΆs Cotton Advisory Board cut its 2011-12 crop estimate for the worldΆs second-largest cotton producer by 1.1 million bales to 34.5 million (375 pounds) and raised its export forecast by 400,000 bales to 8.4 million.
Converted to 480-pound bales, the CAB estimates of 26.95 million for the crop and 6.56 million for exports compare with USDAΆs January forecasts of 27 million and 6 million, respectively. The USDA had cut its crop estimate 500,000 bales on the month but left exports unchanged.
(This conversion is based on the official statistical 170-kilo standard, though some private analysts use a lower figure because actual bale weights typically are significantly lighter.)
The state-run CAB raised its forecast of domestic mill use by a million bales from its previous estimate in mid-November to 26 million and cut its carryout forecast to 5.53 million from 7.85 million. These are about 20.31 million and 4.32 million 480-pound bales, respectively, up from USDAΆs 19.5 million and sharply below its 8.1 million.
A slower International Monetary Fund global growth forecast of 3.5 percent for 2011 drew attention but appeared not to have affected market sentiment. The IMF had projected 4 percent growth in September.
The 17 nations that share the euro will shrink 0.5 percent this year, IMF said in its World Economic Outlook. In September, the IMF had predicted 1.1 percent growth for the region.
EuropeΆs recession is expected to have only modest impact in the United States, where the IMF projected growth at 1.1 percent, unchanged from the September estimate.
Meanwhile, speculators boosted their net long cotton futures position by 3.6 percentage points to 9.2 percent of the open interest during the week ended Friday, according to the exchangeΆs spec-hedge report.
The specs increased their share of the longs by 0.7 of a percentage point and reduced their share of the longs by 2.9 points to 35 percent. They added 2,887 longs and covered 3,012 shorts, boosting their net longs by 5,899 lots to 14,456. Their net long position in both contracts and percentage of open interest was the largest since the week ended Sept. 16.
Commercials increased their hedge shorts by 7,132 lots to 102,915 and their hedge longs by 1,233 lots to 88,459.
