Overbought technical readings nearby and expectations for a sharp cut in plantings have contributed to a mixed performance in cotton futures.
The market finished the week ended Thursday down in current-crop deliveries and up in new-crop contracts. Spot March lost 155 points to close at 81.40 cents, May slipped 87 points to 82.28 cents and July dipped 39 points to 83.05 cents.
New-crop December gained 123 points to settle at 82.38 cents, its highest close since May. It has closed higher six sessions in a row and seven of the last nine.
Cash grower-to-business sales fell to 19,083 bales on The Seam from 45,976 bales the previous week. Prices rose to an average of 75.85 cents from 74.07 cents, reflecting gains to 23.48 cents from 22.38 cents in premiums over loan repayment rates.
Steady growth in stocks in deliverable position, a big and rapid buildup of speculative and fund longs – which raised vulnerability to a downside correction – and an outdistancing of futures to world cash prices contributed to current-crop losses, analysts said.
Nearby futures were due a setback after having advanced five consecutive calendar weeks, longest since the historic bull run of 2011, and finished January with the largest monthly gain, 10.4 percent, since February 2011 when cotton prices surged 16.3 percent.
Traders adjusted positions ahead of updated supply-demand reports and March options expiration, both on Friday, and release of the National Cotton Council’s annual planting intentions survey results on Saturday. China begins a weeklong holiday this weekend.
Analysts wondered whether a major commercial stopper would emerge for March deliveries, noting the availability of cotton from the West Texas Plains at 800-plus points off for the base quality. March traded from a premium to May as wide as 115 points on Jan. 25 to an intraday discount as wide as 98 points on Tuesday.
Certificated stocks grew 168,118 bales, largest since June 2011, and an additional 65,430 bales awaited review. Open interest remained in a steep uptrend, rising to a two-year high to 214,167 lots.
The latest U.S. weekly export sales came in about as expected, with upland sales slowing from a recent robust pace to the smallest since the week ended Oct. 18, while shipments hit a marketing year high. The sales downturn was seen as evidence of weakened demand under elevated prices.
Net all-cotton export sales for shipment this season slipped to 124,300 running bales during the week ended Jan. 31 from 152,900 bales the previous week, USDA reported.
Upland net sales of 93,600 bales were down 29 percent from the previous week and 58 percent from the previous four-week average. Gross sales were 114,100 bales and cancellations were 20,400 bales. Buying destinations included Turkey, 31,000 bales; Vietnam, 10,600; Taiwan, 10,000; Japan, 8,300; South Korea, 5,500; and Mexico, 5,400.
All-cotton shipments climbed to 455,000 bales from 291,300 the previous week. Upland shipments of 440,100 bales were up 61 percent from the previous week and 51 percent from the prior four-week average. The top three destinations included China, 192,900 bales; Turkey, 65,800; and Pakistan, 55,500.
Net sales for 2013-14 rose to 19,500 bales from 5,500 the week before. These were mainly for Mexico, 8,100 bales, and Guatemala, 7,500 bales.
On the crop scene, all the organic cotton in the West Texas Plains has been ginned and committed, according to USDA’s Agricultural Marketing Service. Organic cottonseed sold for $575 and $625 per ton and was committed to dairies that produce organic products.
Elsewhere, with 2012-13 planting finished for the most part in the Southern Hemisphere, production is estimated down about one-fifth in both Brazil and Australia, says the International Cotton Advisory Committee.
Farmers have reduced cotton area in order to switch to profitable competing crops, the ICAC said in a monthly report.
In the Northern Hemisphere, cotton area and production during 2013-14 are expected to decrease 8 percent to 28.4 million hectares (one hectare equals 2.471 acres) and 11 percent to 20.5 million metric tons (94.16 million bales) for the same reason, ICAC said.
Global production next season of 23.2 million tons (106.56 million bales) is projected to fall below consumption of 24.02 million tons (110.32 million bales), a shortfall of 820,000 tons (3.77 million bales).
In 2012-13, world production is seen down 5 percent to 25.949 million tons (119.18 million bales), while mill use is forecast up 2 percent to 23.287 million tons (106.96 million bales). As a result, ending stocks are pegged at a record 16.715 million tons (76.77 million bales).
However, with China holding a large percentage of world stocks in a national reserve, “free” global ending stocks are projected at only 9.7 million tons (44.55 million bales).
World cotton prices didn’t exhibit the usual volatility during the first five months of 2012-13, fluctuating around an average of 83 cents per pound to early January.
Then international prices as measured by the Cotlook A Index, led by futures, surged from 83.10 cents on Jan. 10 to 90.35 cents on Jan. 31, highest of the marketing year. The ICAC upped its average price forecast 4 cents from a month ago to 87 cents, against 100 cents in 2011-12.
Meanwhile, trend-following funds bought 11,524 lots in cotton futures-options combined during the week ended Jan. 29 to raise their net long position to 58,909 lots, according to traders-commitments data from the Commodity Futures Trading Commission.
This was these funds’ largest net long position since Sept. 28, 2010. Index funds bought a net 1,332 lots to boost their net long position to 73,844 lots and traders with non-reportable positions bought 5,863 lots to hike theirs to 15,744 lots.
Commercials sold a net 18,719 lots, adding 20,177 shorts and 1,458 longs to bring their net short position to 18,719 lots.