Spot May gained 224 points for the week ended Thursday to close at 89.58 cents, settling above its 18-day moving average for the first time since a one-day stand on the limit-up finish on March 5 after India announced a cotton export ban.
July advanced 222 points to 90.23 cents and new-crop December edged up 68 points to 88.95 cents. The intercrop July-December straddle settled at a 128-point premium on July, against a 26-point premium on December a week earlier.
Without carry between July and December, any remaining old-crop stocks likely would be aggressively offered to avoid holding onto cotton going into a bearish new-crop situation, a trade analyst said.
Coming into Thursday’s session, May had fallen below 88 cents eight trading days in a row, hitting a new low for the move by a single tick at 87 cents — lowest since Dec. 23 — on March 16. May settled Thursday above highs of the previous eight sessions at its highest close since March 7.
U.S. weekly export sales of 200,400 running bales for delivery this season boosted 2011-12 commitments to 11.503 million, nearly 8 percent above the USDA forecast. The data suggested a likely boost in the export estimate in the April supply-demand report, cutting U.S. ending stocks.
Shipments of 309,100 running bales brought exports for the season to 6.207 million, 58 percent of the USDA estimate. With 19 weeks left in the marketing year, shipments need to average roughly 234,900 running bales a week to reach the current forecast. New-crop sales totaled 87,100 bales.
Cash grower sales quickened to 19,802 bales from 9,399 bales the prior week on The Seam. The cotton changed hands on prices averaging 81.98 cents, up from 78.55 cents, and a 254-point increase to 20.03 cents in premiums over loan redemption rates. Daily price averages ranged from 76.10 to 84.14 cents.
Looking ahead, U.S. upland growers coming into March had forward contracted only 591,106 acres of their expected 2012 crop, far below 3,088,408 acres booked a year ago, according to informal surveys by the cotton division of USDA’s Agricultural Marketing Service.
Growers had booked around 165,440 acres in the Southeast, 420,733 acres in the Mid-South and 4,933 acres in the West. No acreage was reported under contract in the Southwest.
Extreme price volatility last year has contributed to inhibiting new-crop contracting. Prices hit an all-time high of $2.27 per pound in March 2011 and then plummeted nearly 60 percent by the end of the year.
That type of volatility did not serve the interests of any industry segment, Gary Adams, the National Cotton Council’s vice president for economics and policy analysis, has noted.
Few growers had cotton to sell at those very high prices. Textile mills were caught in a wave of panic buying without corresponding yarn orders. Sales cancellations hit cotton merchants and arbitrations soared.
“I don’t think the absolute level of prices is as important — if everyone can make some money — as stability in prices,” Wally Darneille, president and CEO of the Lubbock-based Plains Cotton Cooperative Association, told The Cotton Board this month. “Volatility has killed us over the last couple of years.”
Legal problems have persisted on contract defaults totaling hundreds of millions of dollars. The International Cotton Association, the industry’s Liverpool-based self-regulator, already has received 61 cases for arbitration this year. This is up from an annual average of 45 cases between 2000 and 2010. The cases spiked to a record 242 cases in 2011.
Turning to cotton under loan, outstanding 2011-crop loans fell 206,961 bales to 2,695,608 during the week ended March 13. Repayments rose to 220,872 bales and entries were 13,911 bales.
Of the outstanding total, much of which is believed committed, 430,642 bales or 16 percent were Form A loans issued to individual growers and 2,264,966 bales or 84 percent were Form G loans issued to marketing cooperatives or loan servicing agents.
On the international scene, crop arrivals in India, the world’s second-largest cotton producer and exporter, reached 24.176 million bales (170 kilos) by March 18, 8.5 percent behind a year ago, according to the Cotton Corp. of India. This would be about 18.88 million 480-pound bales.
The arrivals lag has widened for two weeks but the period included market closures to protest the export ban, which now has been partially lifted to allow shipment of outstanding sales. Just before the ban was implemented, arrivals were less than 4 percent behind those of a year ago.
“Should India remain out of the international market going forward this crop year, and I believe they will, buyers will be scrambling to meet their needs elsewhere above and beyond that seen to date,” says Sharon Johnson, senior cotton analyst with Penson Futures in Atlanta.
China’s voracious appetite for cotton to rebuild its strategic reserves and India’s reluctance to ship any more cotton than that on the books prior to its export ban are likely to create an artificially tight supply and strong demand in the last four months of the season, she said.
“As I have said along with other analysts, the gross level of the projected world carryout of 62 million bales is a deceptive figure, since the readily available cotton is considerably less,” she added.
Meanwhile, trend-following funds sold a net 4,786 lots during the week ended March 13 to boost their net short position in cotton futures-options combined to 7,553 lots.
Index funds bought a net 794 lots to raise their net long position to 68,180 lots, while traders with non-reportable positions bought a net 1,105 lots to hike theirs to 2,346 lots.
Commercials bought 2,888 lots, adding 2,425 longs and covering 463 shorts. This pared their net short holdings to 62,972 lots.