Unable to generate additional downside momentum, cotton futures bounced off nearby support and drifted sideways on light volume last week after falling sharply on mixed readings of updated U.S. and world balance sheets for 2012-13 and initial forecasts for 2013-14.
Spot July lost 189 points for the week ended Thursday, May 16, to close at 86.03 cents but finished down only 45 points from Friday, May 10, the day of USDA’s supply-demand estimates. It fell back below its 50-day moving average on May 10 and remained below it on May 16, but it held on a closing basis above support at the prior week’s low of 85.39.
December shed 152 points from May 9 and 49 points from May 10, settling at 85.33 cents, a nine-session low finish. But it stayed within the trading range established the day of the USDA reports between 84.70 and 86.97 cents, finishing in the lower third of the 227-point span.
U.S. 2013-14 supply-demand forecasts put production below expectations and the carryout down a larger-than-expected 25 percent from the beginning level. World ending stocks mushroomed to 84 percent of mill use, but stocks outside China are only 31 percent of global consumption.
The USDA’s U.S. 2013-14 forecasts featured a 19 percent reduction in production from 2012-13 to 14 million bales off 8.4 million harvested acres, lowest in four years, with abandonment estimated at 16 percent from a prospective planted area — carried forward from the March intentions — of 10.03 million acres.
Abandonment in the Southwest is projected at 25 percent because of continued drought. The crop estimate is the same as that projected by USDA at its outlook conference in February.
Exports are forecast at 11.5 million bales, down 13 percent from 2012-13 owing to the smaller available domestic supply and lower imports by China. Domestic mill use is projected up 100,000 bales to 3.5 million.
Ending stocks are expected to fall a million bales to 3 million, equal to 20 percent of total use, well below the previous 10-year average and down from 24 percent in 2012-13.
The forecast range for the marketing year average price received by producers is 68 to 88 cents, compared with 72 cents estimated for 2012-13.
For 2012-13, USDA nudged the crop estimate up to 17.32 million bales from 17.29 million foreseen a month ago, raised exports 250,000 bales to 13.25 million and cut ending stocks 200,000 bales to 4 million.
The higher export estimate reflected recent activity and stronger expected imports by China, which were raised 1.75 million bales from last month to 18.25 million. India’s production rose by a million bales to 26.5 million and consumption by 750,000 bales to 22.75 million.
Globally, projections showed 2013-14 ending stocks surging 7.96 million bales from this season’s carryout to a record 92.74 million, with China’s share rising to 63 percent from 57 percent for 2012-13. However, world stocks minus China are expected to fall 1.96 million bales next season to 34.56 million.
World production is projected to drop nearly 3 percent to 117.82 million bales, while global consumption is expected to rise 2 percent to 110.43 million bales on modest growth in the world economy. Mill use would be up 7 percent from the eight-year low of 102.98 million bales in 2011-12 but still below production for the fourth straight season.
Trade is forecast down 12 percent to 39.5 million bales as sharply lower imports by China and India are partially offset by increases for Pakistan, Turkey, Mexico and others.
China’s national reserve stocks are forecast to reach nearly 40 million bales by the end of 2012-13. Based on China’s current reserve purchase and release prices, USDA is projecting China will import 12 million bales in 2013-14 and will add 10 million bales to ending stocks as reserve purchases exceed reserve sales.
The market showed little reaction to U.S. weekly export sales. Bookings for this season of 82,900 running bales during the week ended May 9, down from 118,600 bales the week before, brought 2012-13 commitments to 12.778 million RB.
Commitments have reached 99-plus percent of the new export forecast and are 891,400 bales or 8 percent ahead of cumulative sales a year ago. Outstanding sales slipped to 2.462 million bales, down from 3.248 million sold but not shipped a year ago.
Shipments rose to 330,400 running bales from the prior week’s 297,700 bales and boosted exports for the season to 10.316 million. This is 80 percent of the projection, compared with 76 percent of final shipments at the corresponding point last season.
Shipments topped exports a year ago by 1.678 million bales or 19 percent. The USDA estimates exports to exceed year-ago shipments by 13 percent. To achieve the export estimate, shipments need to average roughly 230,600 running bales a week.
New-crop sales slipped to 68,800 bales from 84,000 the previous week, hiking 2013-14 commitments to 1.609 million RB. These bookings are 336,000 bales ahead of forward sales a year ago.
The 2013-14 commitments are about 14 percent of USDA’s May forecast for exports next season. A year ago, forward bookings were about 10 percent of the exports now expected for 2012-13.
On the U.S. crop scene, planting edged up six percentage points during the week ended May 12 to 23 percent done, widening the lag behind last year to 23 percentage points and behind average to 15 points.
Progress in Texas crept up four points to 20 percent planted, 14 points behind last year and 11 points below average. Squaring totaled 2 percent, four points behind a year ago and two points behind average.
Growers in Georgia had planted 23 percent, up six points on the week but behind 42 percent a year ago and 34 percent on average. Plantings in the Delta states ranged from 3 to 29 percent completed, compared with the five-year average of 21 to 81 percent