U.S. ending stocks cut more than expected but world carryout boosted to a new all-time high at 77% of mill use. Stocks fell in rest of the world outside China. Sales of reserve stocks reported to begin Monday.
By Duane Howell -
DTN Cotton Correspondent
Cotton futures settled higher in current-crop contracts Friday after USDA chopped U.S. ending stocks by a more-than-expected 11.1% from a month ago but raised the world carryout by 2.6% to a new all-time high. Spot March closed up 42 points to 75.62 cents, just above the middle of its 204-point range from up 124 points at 76.44 to down 80 points at 74.40 cents. May rose 36 points to 76.40 cents, July edged up 29 points to 77.41 cents and December eased off five points to 79.04 cents.
March posted the session high just before release of the supply-demand report, fell to a five-day low right after that, and bounced to close above highs of the previous two sessions. For the week, March gained 54 points, its second weekly gain in a row and fourth in the last five weeks, while May added 51 points, July rose 56 points and December dipped six points.
Volume quickened to an estimated 28,600 lots from 15,521 lots the previous session when spreads totaled 5,745 lots or 37% and EFP 38 lots. Options volume totaled 8,012 calls and 5,393 puts. U.S. production fell 250,000 bales from the December forecast to 17.01 million, with a 500,000-bale reduction to 5 million in Texas -- because of larger estimated abandonment -- partially offset by increases in other states.
Estimated planted area dipped 40,000 acres on the month to 12.32 million and abandonment jumped 1.01 million acres to 9.43 million. This reflected an abandonment of 2.89 million acres or 23.5%. Yields rose 73 pounds to 866, up from the five-year average of 817 pounds and just below the record of 879 pounds in 2007.
The export projection topped expectations by a wide margin, rising 400,000 bales to 12.2 million. This reflected larger import demand by China and supportive data on U.S. export sales to date, USDA said. Domestic mill use was unchanged at 3.4 million bales.
Ending stocks now are expected to fall 600,000 bales from the December estimate to 4.8 million, still up from 3.35 million bales a year earlier. The stocks-to-use ratio is estimated at 30.8%, down from the December estimate of 35.5% but up from 22.3% in 2011-12. The USDA raised its forecast of the average price received by producers by a cent on the lower end to a range of 66 to 71 cents, nudging the midpoint up 50 points to 68.50 cents.
Globally, USDA shaved beginning stocks by 333,000 bales to 68.85 million, boosted production by 1.93 million bales to 118.83 million, cut consumption by 420,000 bales to 106.06 million and hiked ending stocks by 2.08 million bales to 81.72 million. Consumption fell mainly on a 500,000-bale reduction to 21.5 million for India.
The world stocks-to-use ratio is estimated at 77.05%, up from 74.8% projected in December and 66.8% last season. China's ending stocks rose by 3 million bales on the month to 40.61 million, 49.7% of the world carryout.
Stocks in the rest of the world outside China fell 920,000 bales to 41.11 million. Production climbed 2 million bales to 33.5 million in China, where USDA said recent levels of classing and purchases for the national reserve indicate the crop is larger than previously estimated.
A million-bale-increase to 12.5 million in China's imports boosted world trade, projected up 1.2 million bales to 38.9 million, and exports were raised for India, the United States, Brazil and Australia. China's imports are forecast higher because of strong imports to date and tight free stocks resulting from the large accumulation of cotton in the
national reserve, USDA said. Meanwhile, China is reported to have confirmed sales of cotton from its reserves stockpile will begin Monday. The announcement apparently made no mention of an import quota.
Futures open interest expanded 1,116 lots Thursday to 171,522, with March's down 167 lots to 117,349 and May's up 594 lots to 26,710. Cert stocks grew 518 bales to 100,170. There were 604 newly certified bales, 86 bales decertified and 7,972 bales awaiting review. World prices as measured by the Cotlook A Index gained 25 points Friday morning to 83.35 cents. The premium to Thursday's March futures settlement narrowed 16 points to 8.15 cents. (Source: Agfax.com)