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: Higher Despite Outside Pressure
The cotton market closed higher Monday. Futures were up despite pressure from outside markets and the weakness in the soy complex. July added 147 points to finish at 92.48 cents and December was 102 points higher at 89.30 cents.
Cotton showed strength in the key July contract, pushing to the highest level in 3 weeks, which was when the export sale cancellations started coming in. July closed a little below those highs, so we will see if strength carries through tomorrow or if profit taking sets in. The December has still been slower to post gains, but we will likely add to new crop sales soon, as the fundamentals are still fairly bearish.
On the positive side, there was news today of China reducing its import tax, which would be favorable for U.S. cotton exports. Thursday’s weekly export report was a bit of a snoozer. Traders were expecting sales to be negative, and they were, but not by much, a mere 3,894 running bales for upland, 6,721 running bales if you add in the pima. China, Pakistan and Turkey accounted for most of the cancellations. Shipments remain solid, however, at a total of 277,006 running bales. Approximately 68% of the estimated 11.4 million bales of U.S. cotton exports have shipped so far, and there are more than enough outstanding sales to allow for some cancellations.
India’s news continues to flip-flop. Thursday morning India’s trade secretary announced that they would be be allowing new registrations of cotton for exports. This follows Wednesday’s news that India will ship 1.9 million bales of cotton by May 7 and that total exports will amount to 11.5 million 170 kg bales, equivalent to 8.98 million U.S. 480 lb bales. This is a little higher than USDA’s recent increase in its India export forecast from 7.75 million to 8.90 million bales for export. India’s cotton exports are larger than expected, so it is not a big surprise that they will hold off on shipping any additional cotton given their previous activity. Also, India’s Cotton Advisory Board has increased its cotton production estimate to a new record 34.7 million 170 lb bales, or 27.09 million 480 lb. bales.
More cotton on the world market should weigh on prices, particularly for an exporting country like the U.S. However, world cotton market participants are frustrated with India’s recent export fiasco, and might shy away from additional purchases.
Crop Progress report as of 4/22/12 showed 17% of the crop planted so far, up from 12% at this point last year and the 5-year average of 13%. Texas is ahead of normal at 23% and Arizona is a blazing 47% also. Only California is behind at 30% versus the average 68%, but this is an improvement over last week’s 10%.