PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton prices dip slightly after crop forecast cut
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Sun Oct 19 21:42:12 CDT 2014
LUBBOCKONLINE.COM - Howell: Cotton prices dip slightly after crop forecast cut
Posted: October 19, 2014 - 12:05am
By Duane Howell
For A-J Media
Cotton futures have posted small weekly losses after traders digested monthly forecasts showing a reduction in U.S. ending stocks and a new all-time high in the world carryout amid wild turbulence on Wall Street.
The December delivery eased 38 points for the week ended Thursday to close at 63.56 cents. It hit a high of 65.50 cents just ahead of the supply-demand report Oct. 10, rose to 65.65 Tuesday, fell to 63.29 Wednesday and settled in the lower quarter of the 236-point range.
December posted its highest intraday price since Sept. 18 on tight nearby supplies and stop-and-go harvesting. Fears of slowing global economic growth, which hammered equities at midweek, may have contributed to demand-side worries in the cotton market.
March dipped 56 points to settle at 61.71 cents, finding support just above its declining 18-day moving average.
Five-to-seven-day forecasts for favorable harvest weather in most areas of the Cotton Belt may have helped to keep a lid on rally attempts at the end of the week. Wet conditions in the Delta and Southeast and general quality uncertainties had contributed to earlier gains.
Slumping oil prices raised concerns about intensified competition for cotton from polyester for fiber market share.
Cash grower-to-business sales increased to 5,751 bales from 4,364 bales on The Seam. Prices eked up 13 points to an average of 64.28 cents, reflecting a 28-point dip in premiums over loan repayment rates. Daily price averages ranged from 58.50 to 67.50 cents.
The USDA's supply-demand forecasts showed smaller U.S. production prospects and lower prices, steady demand and a 300,000-bale reduction to 4.9 million in ending stocks.
The crop fell 283,000 bales to 16.255 million, mainly on a 350,000-bale cut to 6.250 million in Texas. Upland prospects fell to 15.677 million bales and the Pima outlook held steady at 578,000 bales.
Expected exports remained at 10 million bales, lowest since 2000-01, but the U.S. share of world trade is forecast to increase to 29 percent, highest in four seasons. Domestic mill use held at 3.8 million bales.
A midpoint projection of 60 cents for the crop year average farm price, down 4 cents following policy announcements by China, is down from a final 77.90 cents in 2013-14 and 72.50 cents in 2012-13.
Globally, USDA raised ending stocks by 820,000 bales to 107.11 million. Beginning stocks rose by 1.01 million bales, mainly on upward revisions in 2013 crop estimates for China and Brazil. Rest-of-world ending stocks outside China increased 1.57 million bales to 44.95 million, up 16 percent from the prior year.
China's projected imports fell a million bales to 7 million, its crop climbed a million bales to 30.5 million, consumption grew 1.5 million bales to 38 million and ending stocks dropped 750,000 bales to 62.16 million. The carryout would be 58 percent of world stocks.
Global production rose by 1.36 million bales to 119.37 million. Increases for China, India and Pakistan were partly offset by reductions for the United States, Australia and Zimbabwe. India's crop prospects grew a million bales to 31 million, nudging ahead of China as the world's largest cotton producer.
Consumption increased 1.56 million bales to 113.68 million, highlighted by the growth in China where mills are expected to reduce yarn imports in favor of spinning domestic cotton.
World trade is expected to decline about 800,000 bales to 34.4 million on the lower imports by China.
Stocks in India jumped a sharp 1.95 million bales to 13.62 million on a combination of higher production and lower offtake.
Production prospects fell 271,000 bales to 4.484 million in the Texas High and Rolling Plains. Estimates dropped 171,000 bales to 3.694 million on the High Plains and 100,000 bales to 790,000 in the adjoining Rolling Plains, compared with last year's 2.446 million and 822,000 bales, respectively, for a combined 2013-14 output of 3.268 million.
The High Plains production, up 51 percent from last year's drought-stricken crop, is expected to account for 24 percent of the U.S. upland outturn and 59 percent of the Texas output.
Applications of harvest-aid chemicals have expanded on the Plains. An estimated 25 percent of the cotton fields had been defoliated by Oct. 9, and a small number of modules had accumulated on some gin yards. Some drip-irrigated fields have yielded four bales an acre.
The U.S. harvest advanced seven percentage points to 22 percent complete in the week ended Oct. 12, two points behind the five-year average, USDA reported.
Boll opening expanded four points to 77 percent, eight points behind average. The biggest boll opening lag was in Texas at 18 points behind the average of 63 percent. However, the Texas harvest at 20 percent complete trailed the average by only a point.
Conditions of cotton remaining on the stalk improved marginally, with good to excellent unchanged at 47 percent, fair up a point to 34 percent and poor to very poor down a point to 19 percent. The DTN cotton conditions index edged up to 114 from 111.
In Texas, good-excellent cotton was up a point to 33 percent, fair up three points to 41 percent and poor-very poor down four points to 26 percent. Excellent cotton in Arkansas fell to 7 percent from 25 percent and poor-very poor jumped to 29 percent from 5 percent.
Meanwhile, trend-following funds bought 6,302 lots to reduce their net shorts in futures-options combined by 23.9 percent to 20,100 lots during the week ended Oct. 7, according to government data.
The net shorts held by those funds plus those held by traders with non-reportable positions — mostly small speculators — had ballooned the previous week to 33,211 lots, largest in more than eight years.
Index funds bought a net 342 lots to nudge their net longs up to 58,460 lots, while small specs bought 2,727 lots to cut their net shorts to 4,083 lots. Commercials sold 9,369 lots, liquidating 7,031 longs and adding 2,338 shorts to raise their net shorts to 34,277 lots.
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