June 09 2017
DTN Cotton Close: Heads Lower on Supply-Demand Report
U.S. 2017-18 export forecast cut 500,000 bales and ending stocks raised by a corresponding amount. World ending stocks rose by 570,000 bales. Global crop less China projected to exceed consumption by 12.22 million bales.
Cotton futures moved lower Friday on the heels of USDA’s monthly supply-demand estimates showing a 10% increase in U.S. 2017-18 ending stocks linked to a largely unexpected cut in exports.
July dropped 86 points to close at 75.69 cents, near the low of its 94-point range from down six points at 76.49 to down 100 points at 75.55 cents. It printed a new low since April 10 and lost 100 points for the week, the fourth weekly loss in a row and fifth in the last six weeks.
December closed down 61 points to 72.49 cents, around the lower quarter of its 93-point range from 73.19 to 72.26 cents. It lost 63 points for the week and settled on its lowest close since May 23.
Volume quickened to an estimated 41,447 lots from 34,577 lots the previous session when spreads accounted for 21,194 lots or 61% and EFP 72 lots. Options volume increased to 7,410 lots (5,221 calls and 2,189 puts) from 4,326 lots (1,754 calls and 2,572 puts).
The increase in the U.S. carryout stemmed from a 500,000-bale reduction to 13.5 million in the export forecast. Higher foreign production is expected to reduce global import demand, USDA said.
If realized, the carryover would be a nine-year high. The stocks-to-use ratio would rise to 32.5% from 28.7% foreseen last month and 18% estimated for 2016-17. That would be the highest SUR since 2008-09 when it was 37.7%.
Projected production remained at 19.2 million bales ahead of the planted acreage report at the end of the month. Beginning stocks and domestic mill use also were unchanged.
The projected range for the 2017-18 marketing year farm price remained at 54 to 74 cents. The midpoint of 64 cents is down from the 2016-17 price estimate of 68.50 cents, which was reduced 50 points, but up from 61.20 cents in 2015-16.
Globally, USDA raised production 1.51 million bales to 114.73 million, hiked consumption 760,000 bales to 116.51 million and increased ending stocks 570,000 bales or 0.65% to 87.71 million. Stocks still would be the lowest since 2011-12. World trade prospects were reduced 2%.
Crop forecasts grew for Pakistan, China and Mexico based on higher estimated planted area. Higher global mill use reflected increases for China, India and Pakistan, largely because of higher domestic supplies.
China’s consumption was raised in both 2016-17 and 2017-18 by a combined million bales as sales from the national reserve and steady imports suggested that mill use is stronger than previously estimated.
A reduction of nearly 800,000 bales to 36.85 million in world imports resulted primarily from lower expected demand by Pakistan and Mexico. Exports were lowered for India, Brazil and others along with the U.S. cut.
Production in the world less China is projected to exceed mill use by 12.22 million bales, compared with 11.47 million bales forecast last month and 7.17 million bales now estimated for 2016-17.
Futures open interest dipped 298 lots to 232,940 on Thursday, with July’s down 4,760 lots to 63,994, December’s up 3,954 lots to 140,331 and March’s up 444 lots to 18,904.
Certified stocks grew 4,075 bales to 453,374. There were 4,242 bales decertified and 167 newly certified bales. Awaiting review were 6,208 bales, including 2,024 at Galveston and 4,184 at Memphis.