Free-falling cotton futures hit fresh two-year-plus lows last week amid expectations for a buildup in U.S. stocks and growing world inventories outside China.
Benchmark December lost 351 points for the week ended Thursday to close at 68.55 cents, a contract low finish just above its lifetime intraday low of 68.25 cents established in early June 2012.
December has closed lower eight sessions in a row and 11 of the last 12, including four new contract low settlements in a row. Fund and speculative selling blunted rally attempts at strategic technical levels.
Traders expected USDA’s supply-demand report Friday to show U.S. 2014-15 ending stocks rising from 4.3 million bales projected last month and stocks outside China growing from 41.95 million bales. The 2013-14 June estimates were 2.7 million and 38.69 million bales, respectively.
The market shrugged off constructive U.S. all-cotton export sales totaling a combined 271,500 running bales during the week ended July 3 for this season and next, up from 101,300 bales the previous week.
New-crop upland sales of 203,200 bales, up from 59,700 bales, were the second largest registered for the marketing year beginning Aug. 1, narrowly behind only 203,700 bales reported for the week ended Feb. 13.
Upland sales for shipment this season of 67,600 bales, up 16 percent from the prior four-week average, and small Pima sales brought 2013-14 commitments to 10.782 million bales, 106 percent of the June estimate.
All-cotton shipments slipped to 141,200 running bales from 175,100 bales the week before, with upland exports of 136,400 bales falling 9 percent from the prior four-week average. But shipments remained slightly above the pace needed to make the estimate.
On the U.S. crop scene, ratings improved and progress remained ahead of last year but behind the five-year average in the week ended July 6.
Cotton in good to excellent condition rose to 55 percent from 53 percent a week earlier, USDA said, with fair at 32 percent down from 34 percent and poor to very poor unchanged at 13 percent. A year ago, 44 percent was good to excellent and 24 percent was poor to very poor.
The DTN cotton condition index based on the USDA report increased to 138 from 135 a week earlier and 97 last year.
In Texas, good to excellent cotton rose a percentage point on the week to 41 percent, but fair fell three points to 37 percent and poor to very poor increased two points to 22 percent.
Squaring across the belt advanced 17 points for the week to 53 percent, four points ahead of last year but seven points behind average. Cotton setting bolls increased five points to 12 percent, up from 9 percent a year ago but behind the average of 16 percent.
U.S. upland growers had contracted about 6 percent of their expected acreage as of July 1, according to informal surveys conducted by the cotton division of USDA’s Agricultural Marketing Service.
The survey, based on the June plantings report, showed contracting was down from 11 percent a year ago and the smallest since 2009 when only 2 percent had been booked. The estimates don’t include cotton consigned to marketing organizations but do include cotton contracted with them.
By regions, bookings included 11 percent in the Southeast, against 32 percent a year ago; 9 percent in the Mid-South, down from 15 percent; 4 percent in the Southwest, up from 2 percent; and less than 0.5 percent in the West, compared with 3 percent last year.
On the international scene, traders monitored a deficit monsoon in key cotton areas of India, the world’s second-largest cotton producer. The monsoon is crucial to the production of various Indian crops.
India’s government, worried that poor monsoon rains will depress the country’s grain production, is planning to hold onto supplies for its domestic market instead of boosting exports — something that could push up prices for wheat and rice, Dow Jones Newswires reported.
India is the world’s No. 1 rice exporter and also has become a prominent supplier of wheat ever since the government lifted a ban on exports of the two grains in September 2011.
To avoid any shortfall, the government has dropped a plan to auction 5 million tons of rice from state stockpiles in the open market and to keep on hold a program under which wheat was being sold regularly through state-run trading companies to global bidders.
India’s 2014-15 cotton production was projected by USDA last month at 28.5 million bales, nearly 7 percent below the country’s 2013-14 output, despite an increase in the estimated area.
With demand for India’s textile product exports expected to remain strong, USDA projected its cotton consumption to rise 2 percent to a record 24.3 million bales.
But with world trade projected down 13 percent from 2013-14, mainly because of China’s reduction in raw cotton imports, India’s exports were forecast to decline 37 percent to 5.7 million bales.
Updated 2013-14 estimates by India’s Cotton Advisory Board earlier this month put exports at 11.4 million 170-kilogram bales, or 8.9 million 480-pound bales, close to USDA’s 9 million bales.
Meanwhile, trend-following funds sold 9,224 lots in cotton futures-options combined to chop their net long position by 38 percent to 5,618 lots during the week ended July 1, according to government data.
Those funds reduced their net longs to the smallest since they were net short Dec. 3. Index funds bought 171 lots to nudge their net longs up to 64,248 lots, while traders with non-reportable positions sold 2,847 lots to reverse to net short 2,342 lots from net long 505 lots.
Commercials bought 11,900 lots, covering 6,776 shorts and adding 5,124 longs to shave their net shorts to 67,526 lots. In futures only, non-commercials cut their net longs by 5.9 percentage points to 8.3 percent of the open interest, which rose by 788 lots to 146,236.
Source:- lubbockonline.com
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