Cotton futures soared, contrasting with a somewhat muted session for other ag markets, after the US issued a surprise downgrade to expectations of domestic supplies, citing improved export expectations.

New York cotton futures for December closed 2.7% higher at 68.97 cents a pound, surging up through a series of moving averages, including the 40-day, 50-day and 100-day lines

The gains followed a cut by the US Department of Agriculture of 600,000 bales, to 4.30m bales, in its forecast for domestic cotton inventories at the close of 2016-17, next July.

The downgrade caught off-guard a market which had expected only a marginal, 30,000-bale cut to the stocks estimate.

'Ending stocks down sharply'

The USDA said its downgrade was in part due a lower harvest estimate, "reduced 108,000 bales, mainly in Texas", and which has the potential for further decline once damage from Hurricane Matthew in eastern states is factored in.

Overnight, ag officials in South Carolina said that "early estimates indicate a significant loss of the cotton crop" in the state.

However, the main driver of the reduced US inventory estimate was an increased idea of exports, raised by 500,000 bales to 12.0m bales or 2016-17, "due mainly to higher world import demand".

"US production is down slightly, coupled with higher exports, ending stocks down sharply," the USDA said, attributing the improved trade hopes in part to increased ideas of Bangladeshi demand.

"Estimates and forecasts for Bangladesh consumption and imports have been revised substantially upward this month as more detailed 2015-16 data has become available," the USDA said.

The estimate for Bangladeshi cotton consumption for 2016-17 was raised by 400,000 bales to 6.3m bales, increasing the country's grip on the title of top importer of the fibre, ahead of Vietnam on 4.8m bales.

'Demand previously underestimated'

At a global level, the USDA cut again its estimate for world cotton stocks at the close of 2016-17, this time by 2.46m bales to 87.35m bales – a figure which would represent a drop of more than 24m bales over two seasons.

Besides the downgrade to the US inventory estimate, the USDA also flagged upgrades to historical figures on Chinese consumption, with the strong appetite for cotton sold in the recent state auction process a key factor in the revision.

"The sale of more than 12m bales from China's recently completed reserve auctions amid rising domestic prices suggests the China mill demand was previously underestimated," the USDA said.

Tepid cocoa

The rise in cotton future contrasted with a weak session for futures in the main Chicago-traded grains, as described elsewhere on Agrimoney.com, despite improved ideas for US exports of corn, soybeans and wheat.

And some other New York-traded soft commodities struggled too, including raw sugar which for March delivery settled down 0.6% at 23.15 cents a pound.

And cocoa for December eased 0.8% to $2,643 a tonne, after data showed the cocoa grind in western Europe rising by 2.9% in the July-to-September quarter, below the 3.2% increase that investors had expected, according to a Bloomberg poll.

However, arabica coffee futures for December settled up 0.9% at 152.10 cents a pound, boosted by disappointing Brazilian export data for last month, at 2.2m bags, compared with 2.91m bags in September last year, and signalling tighter supplies than thought elsewhere.

"The second straight month of strike in [the port of] Santos directly affected export licensing and September export volumes," said exporters' group Cecafé, which released the data.

Robusta high

In London, November robusta coffee futures settled up 0.5% at $2,038 per tonne, after touching $2,042, the highest for spot contract since February last year, helped by ideas of weak bean exports by Indonesia, a major robusta grower.

Indonesia's coffee bean exports could tumble to about 300,000 tonnes this year, from 400,000 shipped in 2015, said Irfan Anwar, chairman of the Association of Indonesian Coffee Exporters and Industries.

The country's imports, meanwhile, may grow 43% to 100,000 tonnes, he said.