A strengthening U.S. dollar index, which could cut demand for dollar-denominated commodities, contributed to keeping cotton futures on the defensive last week after the Federal Reserve hiked interest rates.
Spot March lost 78 points for the week ended Thursday to close at 62.99 cents, a new low finish since Nov. 30. It lost ground six sessions in a row, holding a few ticks above its 40-day moving average.
Technically, a 50 percent retracement of the rally from the Sept. 24 contract low at 59.45 to the Dec. 9 high of 65.23 would be 62.34 cents.
May dropped 76 points to settle at 63.79 cents, while December 2016 dipped 64 points to 64.59 cents. Open interest coming into the day had declined 6,009 lots for the week to 191,075.
Cash grower sales slowed to 30,054 bales from 64,381 bales on The Seam. Prices averaged 59.21 cents, down from 60.23 cents, reflecting premiums over loan repayment rates of 10.03 cents, down from 11.64 cents. Daily average prices ranged from 54.18 to 60.08 cents.
U.S. all-cotton export sales of 108,600 running bales during the week ended Dec. 10, up from 85,500 the prior week, brought 2015-16 commitments to 4.93 million RB. Cumulative sales trailed year-ago bookings by 2.165 million RB or by 31 percent and were 51 percent of the USDA’s export forecast. A year ago, commitments were 65 percent of final exports.
Sales went to 17 countries, led by Vietnam, China, Turkey, Taiwan, Thailand, Pakistan, Peru, Malaysia and Venezuela. Of the upland sales of 99,500 RB, up 27 percent from the prior week but down 52 percent from the four-week average, Vietnam booked 47,500 RB or 48 percent.
All-cotton shipments slipped to 106,900 RB from 115,500 the previous week, bringing exports for the season to 1.963 million RB, compared with 1.936 million a year ago. Shipments totaled 20 percent of the forecast, against 18 percent of final exports at the corresponding point last year.
Shipments need to average roughly 235,500 RB a week to achieve the estimate, while weekly sales averaging around 143,300 RB would match the export projection.
Cotton imports in Vietnam, now among the world’s top five textile and apparel exporting countries and a growing market for the U.S. fiber crop, are expected to continue rising.
Strong demand for cotton yarns from international markets, especially from China, supports Vietnam to import more cotton to feed its growing spinning sector, says a U.S. agricultural attaché report.
The USDA post estimated Vietnam’s imports in calendar 2015 at 5.04 million bales, up 45 percent from last year.
Thus far this marketing year, which began Aug. 1, Vietnam has bought 719,000 RB of U.S. cotton, up 40 percent from a year ago. It is the third-largest foreign buyer of U.S. cotton behind Mexico and Turkey, up from fifth a year ago.
Based on several favorable conditions for its spinning sector, Vietnam’s cotton imports are expected to grow more strongly in coming years, the attaché report said.
The conditions include China’s increasing imports of cotton yarn and potential opportunities offered by joining the Trans Pacific Partnership and the Free Trade Agreement with the European Union.
The United States is the largest market for the Vietnam textile and garment industry. Vietnam garment exports to the United States reached about $9.8 billion in 2014, 41 percent of its total export value, and key industry sources estimate the total will climb to about $11 billion in 2015, the report said.
In its latest supply-demand report, USDA raised its forecast of Vietnam’s 2015-16 marketing-year imports by 350,000 bales from a month ago to 5.2 million on rapidly rising mill use and new textile investments.
Significant changes are taking place in raw cotton trade around the globe, with China being displaced as the world’s leading importer.
The USDA raised Bangladesh’s imports by 200,000 bales on the month to 5.9 million to rank it as the largest importer. The increase was based on strong mill demand and larger recent shipments from India.
China’s imports were cut 250,000 bales to 5.5 million on declining use and the weak pace of trade to date, while Pakistan’s were boosted 700,000 bales to 2 million on a smaller crop and strong import purchases.
Some veteran cotton analysts expect Vietnam to become the world’s largest cotton importer in the next year or two.
On the U.S. crop scene, upland classing slipped to 980,316 running bales during the week ended Dec. 10 from the prior week’s 1.017 million, bringing the total for the season to 8.694 million RB.
The total is about 71 percent of USDA’s December upland crop estimate in running bales and down 23 percent from 11.293 million RB classed a year ago when 74 percent of the final output had been graded.
Cotton tenderable on U.S. cotton futures contracts totaled 56.1 percent for the season, compared with 71.9 percent a year ago.
More than 80 percent of the Texas High Plains crop was off the stalk by Dec. 11, the Lubbock-based Plains Cotton Growers, Inc., estimated.
Meanwhile, trend-following funds boosted their net longs by 15,140 lots to 54,806 in U.S. cotton futures-options combined during the week ended Dec. 8, according to government traders-commitments data.
They made big buys for a second week, raising their net longs to the largest since May 6, 2014, when nearby futures traded over 90 cents. This was just prior to apparent profit-taking after March hit a four-month high on Dec. 9, the last time it finished ahead.
Index funds cut their net longs by 1,496 lots to 61,958, while traders with nonreportable positions hiked theirs by 3,168 lots to 4,994.
Commercials sold into the reporting week rally, adding 14,849 shorts and liquidating 1,965 longs to raise their net shorts by 16,814 lots to 121,760. This was their largest net short position since July 7.