By Duane Howell
For A-J Media
Profit-taking has contributed to capping an advance to a new rally high in cotton futures, with U.S. weekly export sales slowing sharply on recent price gains.
The market finished mixed for the week ended Thursday. Spot May eked out a seven-point gain to settle at 91.68 cents, July lost 85 points to 89.86 cents and December edged up 39 points to 79.94 cents. December hasn’t closed above 80 cents since October.
The lead contract hit a high of 93.75 cents, the highest intraday price for May since February 2012 and near the spot continuation high of 93.90 cents Aug. 16 on the October 2013 delivery, historically a thinly traded contract. Spot futures have gained 8.3 percent this year.
Worries about China’s economy and mounting tensions over Ukraine amid a steep selloff on Wall Street weighed on the cotton market. China’s economy slowed markedly in the first two months of the year as growth in investment, retail sales and factory output fell to multi-year lows.
Cash grower-to-business sales dwindled to 3,514 bales on The Seam from 18,590 bales the previous week. Prices edged up 42 points to average 83.06 cents as premiums over loan repayment rates rose 99 points to 32.92 cents. Loan values dipped to 50.14 cents.
Daily average prices ranged from 85.36 to 80.54 cents on the lightest weekly turnover since October. Business-to-business sales slipped to 9,144 bales from 9,631 bales, highlighted by 5,538 bales changing hands on Monday on prices averaging a crop year high of 90.63 cents.
Net all-cotton export sales for shipment this season fell to 68,300 running bales during the week ended March 6 from 182,100 the prior week. This nudged 2013-14 commitments up to 9.37 million RB. Upland net sales of 60,000 RB, down 36 percent from the prior four-week average, reflected gross sales of 130,800 and cancellations of 70,900.
Commitments were 90 percent of USDA’s updated export estimate, compared with 88 percent of final shipments at the corresponding point last season. Bookings trailed year-ago commitments by 1.78 million RB or by 16 percent. The USDA estimate is for exports to decline by 18 percent.
All-cotton shipments of 275,500 RB, down from a marketing-year high of 376,900 the previous week, brought exports for the season to a rounded 6 million RB. Shipments are about 58 percent of the forecast, against about 57 percent of final shipments a year ago.
To achieve the USDA estimate, shipments need to average roughly 218,800 RB a week, against an average of 321,300 RB the last four weeks. Sales averaging approximately 50,400 RB would match the export estimate.
Shipments typically tend to decrease toward the end of the season, especially with stocks estimated below 3 million bales, USDA analysts have pointed out.
Net sales for shipment net season of 120,400 RB, up from the prior week’s 48,200 RB, boosted 2014-15 commitments to 940,100 RB. This narrowed the margin behind forward bookings a year ago to 97,600 RB.
The USDA’s updated U.S. supply-demand estimates came in right in line with expectations, with exports up 200,000 bales from a month ago to 10.7 million and ending stocks down a corresponding amount to 2.8 million bales. The stocks-to-use ratio declined to 19.6 percent.
Estimated production remained at 13.19 million bales, as expected, and domestic mill use held steady at 3.6 million bales. The total estimated demand of 14.3 million bales is the lowest since 1988 and the unchanged overall supply of 17.1 million bales is a 29-year low.
Based on the latest ginning and classing figures, many analysts expect the final production to come in shy of the estimate. The USDA may revise the crop estimate in the April supply-demand report following the end-of-season ginning data on March 25 and tweak it further in the final tally on May 9.
The USDA range of 75 to 78 cents for the marketing-year average price received by producers rose by a cent on the lower end, with the midpoint rising 50 points to 76.50 cents. The average last season was 72.50 cents.
Globally, ending stocks are expected to rise by 280,000 bales from a month ago to 96.75 million, which is 88.6 percent of projected consumption. Production was virtually unchanged at 116.68 million bales, up 10,000 bales, and mill use dipped 270,000 bales to 109.21 million.
Decreases in consumption of 500,000 bales each to 35.5 million for China and to 11 million for Pakistan were partly offset by increases mainly of 250,000 bales to 23.25 million for India, 200,000 bales to 4 million for Bangladesh and 100,000 bales to 2.8 million for Vietnam.
China’s consumption was lowered based on increasing concentrations in the national reserve and continued growth in cotton yarn imports, USDA said, while sluggish imports indicated lower mill use in Pakistan.
The lower consumption resulted in China’s ending stocks rising 500,000 bales to 57.81 million, 59.8 percent of the world carryout. Stocks in the rest of the world outside China declined 220,000 bales to 38.94 million, compared with 38.8 million bales in 2012-13 and 42.24 million bales in 2011-12.
Meanwhile, trend-following funds sold a net 645 lots to nudge their net longs down to 40,470 lots during the week ended March 4, according to the latest supplemental traders-commitments data from the Commodity Futures Trading Commission.
Index funds bought a net 765 lots to hike their net longs to 57,095 lots, while traders with non-reportable positions sold a net 458 lots to shave theirs to 7,665 lots.
Commercials bought a net 338 lots, adding 2,022 longs and 1,684 shorts to ease their net longs down to 105,229 lots. In futures only, non-commercials pared their net longs by 0.5 of a percentage point to 31.5 percent of the open interest.
Two days after the reporting week ended on sideways price action and light volume, the market exploded to the upside amid heavy fund buying.