Larger-than-expected U.S. weekly export sales have helped to underpin cotton futures in quiet dealings after prices hit a new rally high.
Spot March gained 27 points for the week ended Thursday to close at 83.33 cents, near Tuesday’s new rally high of 83.72 cents, its highest intraday price since Oct. 23.
The May contract edged up 26 points to 83.06 cents, July rose 69 points to 82.76 and new-crop December gained 24 points to 77.21 cents.
The inverted prices, with nearby deliveries commanding premiums, reflects tight available supplies. But the market has seemed tired and struggling, some analysts said, with only 89 points separating March’s low-to-high-closes (82.49 to 83.38 cents) over the last seven sessions.
Mill buyers were said to have moved to the sidelines as prices continued to inch higher and daily trading volumes declined to as light as 8,992 lots. Trading had reached up to 28,706 lots eight sessions earlier.
Cash grower-to-business sales slowed to 84,045 bales on The Seam from a crop year high of 141,804 bales the previous week. Prices gained 39 points to average 76.55 cents, reflecting gains to 23.51 cents from 22.30 cents in premiums over loan repayment rates.
Upland export sales for delivery this season of 236,000 running bales in the week ended Dec. 12 were up 36 percent from the previous week but down 5 percent from the prior four-week average, USDA said. A slowdown had been expected as prices advanced and supplies tightened.
The sales included 80,400 bales for Turkey, 26,600 for China, 26,500 for South Korea and 25,400 for Turkey.
Upland shipments of 150,400 bales were down 9 percent from the previous week but up 37 percent from the prior four-week average. The primary destinations included China, 45,200 bales; Turkey, 22,100; Mexico, 12,900; Vietnam, 11,500; and Indonesia, 11,300.
All-cotton sales of 242,200 running bales boosted 2013-14 export commitments to 7.065 million, down 1.526 million bales from a year ago. Bookings have reached about 70 percent of the USDA estimate, compared with 68 percent of final exports at the corresponding point last season.
Shipments of upland and Pima combined of 161,200 running bales brought exports for the season to 2.622 million, about 400,000 bales behind the year-ago pace. Exports have reached about 26 percent of the USDA forecast, against about 24 percent of final exports a year ago.
To achieve the USDA projection, shipments need to average roughly 233,300 running bales a week. Sales averaging around 94,500 bales would match the estimate.
Traders pondered the potential impact on China’s cotton import prospects of a sliding-scale tariff schedule announced by the Ministry of Finance for calendar 2014.
The effect would seem likely to raise the cost of importing cotton, though demand uncertainties remain, some analysts said. Some viewed the announcement as confirming that new import quotas will be issued.
The benchmark price will be raised to 15,000 yuan per metric ton (equivalent to 110.98 cents per pound) from 14,000 yuan in 2013.
Above that price, a fixed per-ton duty of 570 yuan will be applied along with a 200 yuan port administration fee and a 13 percent value added tax. For cotton priced below the benchmark, the duties will be calculated according to the modified mathematical sliding-scale formula.
China allows 894,000 metric tons (4.11 million 480-pound bales) of imports at a 1 percent duty under its World Trade Organization commitments. These are known as tariff-rate quotas (TRQ).
In addition, China typically has allowed imports at tariffs ranging between 5 percent and 40 percent. The timing and size of any new sliding-scale tariff imports were unknown.
China’s cotton imports have been expected to fall sharply this marketing year as it sells more of its huge government stockpile.
But the quality of the offerings of government stocks could continue to play a significant role in import demand, some analysts agree.
China’s imports fell 43 percent in November from a year earlier to 173,100 tons (795,030 bales of 480 pounds), according to a report by the state-backed China Cotton Association.
In the first 11 months of 2013, China imported 3.54 million tons (16.26 million bales), a 23.1 percent on-year decline, the report said.
On the crop scene, Informa Economics, widely followed Memphis-based analytical firm, has estimated U.S. cotton plantings in 2014 at 10.8 million acres, up from 10.3 million in 2013, sources said. It projected production at 16.075 million bales, up from an estimated 13.069 million bales this season.
The 3-million-bale increase in production from a 500,000-acre expansion in planted acres likely would require a lower abandonment in Texas, a trader said. Abandonment in Texas is estimated at 41.4 percent this year, and the big West Texas Plains cotton area has remained dry.
Extreme drought has expanded slightly in the western area and severe to extreme drought has persisted in the remainder of the High and Rolling Plains, according to the National Weather Service. This region planted 4.795 million acres of cotton this year, 83 percent of the Texas acreage.
Meanwhile, trend-following funds bought 9,042 lots to reverse to net long 7,286 lots from net short 1,756 lots in cotton futures-options combined during the week ended Dec. 10, according to data from the Commodity Futures Trading Commission.
Those funds likely continued to add to the net long position as the week progressed and March finished with the largest calendar-week gain since mid-August. Index funds sold a net 640 lots to trim their net longs to 62,979 lots, while traders with non-reportable positions bought 2,334 lots to cut their net shorts to 2,799 lots.
Commercials sold 10,744 lots, adding 9,702 shorts and liquidating 1,042 longs to boost their net shorts to 67,465 lots. In futures only, non-commercials raised their net longs by 5.8 percentage points to 10.8 percent of the rising open interest.