A combination of bullish grains data, friendly supply-demand fiber crop estimates on a decline in world ending stocks and a weak dollar index spurred nearby cotton futures to a 13-session high last week.
But cotton skidded from limit gains on Wednesday to close modestly ahead near the day’s lows and then fell to limit losses on Thursday after probing the upside on higher-than-expected U.S. weekly export sales.
The selling was attributed mainly to profit-taking and ongoing fund rebalancing, while mill fixation buying continued to offer an underpinning. Unfixed mill on-call sales based in the spot March contract declined 1,558 lots to 25,473 during the week ended Jan. 7.
March finished with a 284-point gain to 144.06 cents for the week ended Thursday. It hit an intraday high at midweek of 152.25 cents, up 12.65 cents from its low just four sessions earlier and its highest print since Dec. 23. March settled about the midpoint of its three-week range on a closing basis from 140.43 to 147.97 cents.
New-crop December advanced 141 points for the week to close at 102.38 cents. It posted three new-contract highs in a row, peaking at 106.40 cents on Wednesday.
Cash grower trading quickened on The Seam to 38,366 bales from 34,563 bales the prior week. Prices lost 241 points to average 133.55 cents, while premiums over loan redemption rates eased 42 points to 81.66 cents.
World prices as measured by the Cotlook A Index gained 120 points to an average of 172.91 cents, and premiums over prior-days’ spot futures closes maintained a wide average of about 29 cents. As recently as about six months ago, premiums typically ranged around five to eight cents.
Net U.S. all-cotton weekly export sales of 130,100 running bales lifted 2010-11 commitments to 14.085 million, 92 percent of the USDA forecast. New-crop sales of 227,300 running bales, up from the prior week’s 202,600 bales, boosted 2011-12 bookings to 2.16 million bales.
Shipments slowed to 283,100 bales from 310,400 bales. Exports for the season reached 4.578 million running bales, up 22.7 percent from a year ago and around 30 percent of the projection. Shipments need to average roughly 370,100 running bales a week to achieve the estimate.
The USDA’s updated cotton supply-demand estimates showed only minor revisions in U.S. figures, as expected, but shaved world ending stocks by 550,000 bales or 1.26 percent to 42.84 million.
U.S. production rose by 47,000 bales to 18.32 million. Domestic mill use edged up 50,000 bales to 3.6 million on stronger-than-expected activity in recent months. Exports and ending stocks were unchanged.
Globally, mill use rose by a slight 330,000 bales to 116.58 million and production slipped a marginal 70,000 bales to 115.46 million. Beginning stocks dipped 150,000 bales to 43.85 million.
Meanwhile, an upbeat mood prevailed at the Beltwide Cotton Conferences earlier this month, attendees said, and most producers apparently left Atlanta planning to plant additional cotton this year.
A survey by Reuters of industry people, analysts and specialists produced an average estimate of 12.48 million to 12.53 million acres. Estimates ranged from 12 million to 13 million acres. These were linked to USDA’s estimate at the time of 11.04 million planted acres in 2010, reduced slightly this week to 10.97 million.
A dry spring in Texas — especially in the High and Rolling Plains — could encourage additional cotton acreage in a state where the upland area comprised 50.7 percent of U.S. all-cotton plantings last year.
However, dry conditions also could portend higher abandonment, which can vary wildly in Texas. For example, abandonment jumped from 350,000 acres (5.9 percent) in 2005 to 2.3 million acres (35.9 percent) in 2006.
Thus increased statewide plantings of, say 10 percent to possibly 15 percent, could be more than offset by higher abandonment if weather adversity prevails in the high-risk Lone Star State.
A USDA report presented at the conferences said beginning stocks of at least 42.5 million bales will be needed at the start of the new marketing year to avoid market disruption. This estimate is based on a number of variables and assumptions, which are subject to revision as the year progresses, analysts pointed out.
Mills need a steady stream of raw material, but available supplies decline during August-October prior to volume movement of the Northern Hemisphere crop. As the season progresses and availability exceeds use, mills rely less on stocks and more on current-year production.
A total requirement for August-October is 50 million bales, USDA said, and an estimated 7.5 million bales of new production would be available at the point of consumption. Combined with beginning stocks or the old-crop carryover, accessible global supplies would be 50.34 million bales, enough to prevent market disruption.
In opening the meeting, which attracted 2,225 participants, National Cotton Council Chairman Eddie Smith of Floydada described the upturn in cotton’s demand as one of the most encouraging developments of 2010. The world needs more cotton, especially in rapidly developing economies such as China and India, he observed.
“There are still many challenges before us,” he said. “Research, education and technology transfer continue to be critically important. I assure you that the council will continue its longstanding commitment of its resources for technology development and transfer and bringing resolution to the technology-based priorities.”
In other news, India, the world’s second largest cotton exporter, has allocated 1.9 million bales (170 kilos or 375 pounds) for exports to an unprecedented 928 traders. The allocation is the estimated remaining portion of the export limit of 5.5 million bales.
The small volume allotted to most traders — many received the minimum of 500 bales — prompted widespread dissatisfaction among traditional exporters and could to complicate execution of existing commitments, reports indicated. The deadline for shipments is Feb. 25.