Range-bound cotton futures have regained up to more than three-fourths of the ground lost the previous marketing week on some of the lightest trading volumes of the year.
December gained 98 points for the holiday-shortened trading week ended Thursday to close at 65.15 cents, while March rose 63 points to settle at 65.20 cents. Daily turnovers were as low as 14,088 lots.
December hit a high of 66.14 cents on Tuesday — the 10th time in five weeks it has punched to or above 66 cents, only to close below 66 cents each time. The five-week trading range has spanned 336 points from 63.28 to 66.64 cents.
July, the final 2015-16 marketing-year delivery, expired 158 points under October and 148 points under December. It drew only three delivery notices (300 bales) as owners of the certified stocks opted to carry the great bulk of the cotton.
Traders awaited the updated USDA supply-demand report on Tuesday. The report will incorporate last month’s bearish U.S. all-cotton plantings estimate of 10.023 million acres, up 4.7 percent from the March intentions and 16.8 percent from last year’s acreage, into its production forecast.
U.S. crop conditions held steady as of July 3 with a week earlier, USDA reported, while 42 percent was squaring and 11 percent was setting bolls.
Ratings pegged good to excellent at 57 percent and poor to very poor at 8 percent. The DTN cotton condition index, based on the USDA report, remained at 149, which also was even with a year ago.
Conditions improved in Arkansas, California, Georgia, Louisiana, Missouri and Tennessee; held steady in Alabama, Arizona, North Carolina, Oklahoma, South Carolina and Virginia; and declined in Kansas, Mississippi and Texas.
Squaring cotton was two percentage points behind a year ago and five points behind the five-year average, while boll setting was up two points and even, respectively.
Conditions in Texas slipped to 50 percent good to excellent from 52 percent the prior week, while fair rose two points to 40 percent and poor to very poor remained at 10 percent. A year ago, Texas cotton rated 51 percent good to excellent, 38 percent fair and 11 percent poor.
The report didn’t reflect the effects of subsequent days of record and near-record heat in the Texas High and Rolling Plains, where the combined planted cotton area is estimated at 4.495 million acres, 45 percent of the U.S. all-cotton acreage.
Temperatures soared to a scorching 109 degrees Thursday at Lubbock, topping the prior date record of 103 degrees set in 1998. The normal is 93 degrees. The nighttime low was 76 degrees, eight degrees above normal.
Globally, ending stocks in 2016-17 are expected to decline a second year, dropping 3.5 percent to 19.66 million metric tons as mill use again exceeds production, according to the latest estimates of the International Cotton Advisory Committee.
Converted to 480-pound statistical bales, the ICAC projected a 2016-17 global carryout of 90.3 million, down from 93.6 million in 2015-16.
While the world cotton area is expected to contract by 1 percent to 31 million hectares, or 76.6 million acres, average yields are projected to increase by 5 percent to raise production to 104.4 million bales from 99.9 million, the lowest output since 2003-04.
Cotton area in India, the world’s largest producer, is expected to expand by 1 percent to 12 million hectares, or 29.65 million acres, and production to increase by 8 percent to 28.9 million bales. Better monsoon weather may boost yields.
Amid low prices for competing fibers, world cotton consumption is forecast virtually unchanged at 108.7 million bales. This would exceed production by 4.3 million bales, compared to 8.8 million bales in 2015-16.
Mill use in China, the world’s largest cotton consumer, is projected to decline by 5 percent to 31.2 million bales, with increases foreseen in such countries as Vietnam, Bangladesh, India and Pakistan.
Despite stagnant mill use, world cotton trade may increase by 1 percent to 34.17 million bales from 33.71 million. China’s imports are expected to decrease by 8 percent to 4.3 million bales as Beijing continues to restrict imports to reduce its sizable cotton stocks.
However, imports outside China are forecast to increase by 3 percent to 29.85 million bales. With larger exportable supplies foreseen, U.S. exports are forecast by USDA to rise by 17 percent to 10.5 million bales.
The ICAC raised its projection of 2016-17 world average prices as measured by the Cotlook A Index to 72 cents from 70 cents forecast a month ago. This compares with 70 cents estimated for this marketing year and 71 cents in 2014-15.
Separately, Pakistan’s 2016-17 cotton production is forecast at 8 million 480-pound bales, down a million bales from USDA’s June estimate, according to a U.S. agricultural attaché report.
The forecast is up a million bales from the estimated 2015-16 output. Pakistan, the world’s fourth-largest cotton producer, has seen its crop fall sharply from two years ago when it harvested 10.6 million bales.
Faced with low cotton prices for a second year, farmers have opted to reduce cotton planting, shifting to corn and sugar cane where possible. Significant tariffs insulate domestic corn and sugar prices from the international market, while cotton growers face stiff import competition.
Cotton area is forecast at 2.5 million hectares, or 6.18 million acres, down 300,000 hectares, or 741,300 acres, from the previous year.
Meanwhile, trend-following funds sold a net 339 lots in cotton futures-options combined in the week ended June 28, slightly cutting their net longs to 45,198 lots, government traders-commitments data showed.
Index funds sold a net 1,577 lots to reduce their net longs to 64,954 lots, while nonreportable traders bought a net 377 lots to raise theirs to 8,727 lots. Commercials bought a net 1,539 lots, adding 1,611 longs and 72 shorts to chop their net short position to 118,424 lots.