USDA raises 2013/14 cotton stocks forecast again

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NEW YORK: The US Agriculture Department (USDA) raised its forecast for global cotton inventory for the 2013/14 crop year to a fresh record high due to higher supplies in India and the United States, reinforcing expectations of a ballooning oversupply.

Cotton prices pared most of their gains following the government’s monthly crop report that included few significant changes to the outlook even after skipping the October assessment due to the partial government shutdown.

Some traders had expected a bigger increase to the US output estimate after a favorable end of the harvest.

Spot prices finished little changed in a volatile day ahead of December options expiry with prices trading in a wide 200 point range.

The most-active March cotton contract on ICE Futures US eased 0.3 percent to settle at 78.64 cents a lb, while the front-month December contract closed up 0.2 percent at 76.88 cents, ending the week with a slight gain after four straight weeks of loss.

“The long-long awaited USDA world supply demand report released Friday provided little direction for market activity,” said Mississippi State University Agricultural Economist O.A. Cleveland, noting most revisions were within expectations.

In its monthly crop report, the USDA said world inventories will reach a record 95.71 million 480-lb bales by the end of July, raising its forecast for a third time since it first published 2013/14 estimates in May.

That was up 1 percent from its September estimate and a hefty 9 percent increase from last season, reinforcing expectations the world is facing another year of an expanding surplus.

“Sharply higher beginning stocks are partially offset by lower production and marginally higher consumption,” the USDA said in the report. More than half of the total will be held in China, the world’s top textile industry, where the government has been hoarding fiber for the past three years.

The increase was largely due to a surprising 1.9-million bale increase to 10.1 million bales in beginning stocks in India, the world’s No. 2 producer, and higher crops for the United States, Brazil, and Greece. That offset cuts in output in top producer and consumer China and Zambia.

The USDA did not release cotton estimates last month due to a partial shutdown of the federal government. For the United States, USDA boosted its projections for output nearly 2 percent to 13.1 million bales in the 2013/14 crop year, though that would still be the smallest crop in the world’s top exporter in four years.

The increase was below many market participants’ expectations after a decrease in the southwest and Far West regions following a favorable end to an otherwise turbulent growing season.

US ending inventories were marginally increased to 3 million bales from a previous estimate of 2.9 million, as greater mill use helped offset the higher output.

“The lack of upward movement with US production and ending stocks is more neutral than negative given how low supply and carryout are,” said Sharon Johnson, a cotton specialist with KCG Futures in Atlanta.

Source: Brecorder

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