The ICE Dec and Mar contracts gave back 160 and 87 points on the week, respectively, as last week’s inversion between the two contracts gave way to partial carry. Well,
Doane Cotton Close: Market Finishes Mostly Higher
The cotton market finished mostly higher on Tuesday after recovering some of Monday’s substantial losses. Nearby May was limit down on Monday, and at one point today was up as much as 305 points. The remaining contracts were not as strong today, as Monday’s losses were not as drastic as the May contract. December’s largest gain today was 159 points, from which futures retreated and turned negative. May settled 135 points higher at 89.43 cents while December was 4 points lower at 86.33 cents.
Futures bounced back from Monday’s sell-off, especially the May contract, but that was not enough to hold up the deferreds that were not as much lower yesterday. Heavy rains across south Texas and into Louisiana and Mississippi were favorable for building soil moisture levels. The rain and uncertainty over China’s cotton use are bearish factors for cotton right now.
Today’s weekly Crop Progress report showed 13% of the crop planted so far, up from 8% at this point last year and the 5-year average of 9%. Texas is ahead of normal at 18% and Arizona is a blazing 38% also. Only California is behind at 10% versus the average 46%.
Last week’s export sales report was a bit disappointing, though with large shipments and accumulated sales already totaling the 11.4 million bale export estimate, this was not a big concern. Shipments were still solid at a little over 200,000 running bales. Though down from recent weeks, this will still easily meet USDA’s forecast. Weekly sales were a net negative 53,600 running bales due to cancellations from China, Indonesia and Guatemala.
April’s monthly Supply/Demand report from USDA was mixed for cotton, with U.S. fundamentals bullish while the world data were a bit bearish. USDA cut the U.S. yield for 2011 to 766 lbs/acr, down from 772 lbs/acr. This dropped production from 15.67 million bales to 15.56 million, which was in line with trade expectations. Exports were raised a huge 400,000 bales, putting them at 11.4 million. The weekly export reports have shown shipments maintaining a strong pace since late January, which has indicated that the export forecast would likely be increased. Hence, this was not a huge surprise for the adjustment to be made, but it was a bit more than was expected at this point in the marketing year, given USDA’s tendency to be slow in making such adjustments. The cut in production and increase in exports decreased ending stocks by a huge 500,000 bales to 3.4 million. This would typically be quite bullish, but given the burdensome world stocks, which were increased even further in this report, the impact is muted.
On the world level 2011/12 ending stocks were raised 3.75 million bales to 66.07 million. Ending stocks for 11/12 have been increased every month since September when they were estimated at 51.91 million bales. That puts cotton stocks 14.16 million bales higher than we were expecting 7 months ago. In September 2011 July cotton futures were trading in the mid to upper 90-cent range, whereas now they are trading in the upper 80-cent range. The growing stocks have mostly been due to cuts in the consumption forecast. However, today’s jump was largely attributable to a boost in 11/12 beginning stocks, as India’s “loss” category is now pegged at -1.75 million bales for both 09/10 and 10/11.