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DTN Cotton Close: Falls as Large Ending Stocks Still Loom

Ernst Undesser
By Duane Howell DTN Cotton Correspondent October 12, 2017

DTN Cotton Close: Falls as Large Ending Stocks Still Loom

©Debra L Ferguson Stock Images

U.S. crop forecast dropped 643,000 bales to 21.12 million, mainly on cuts in Texas and Georgia. Exports reduced 400,000 bales and ending stocks cut 200,000 bales. World estimates showed small adjustments.

Cotton futures settled lower Thursday as traders digested USDA supply-demand forecasts generally in line with most pre-report estimates, with large ending stocks still expected.

December settled down 89 points to 67.84 cents, in the lower quarter of its 145-point range from up 38 points at 69.11 to down 107 points at 67.66 cents. March lost 93 points to close at 67.37 cents, near the low of its 136-point trading span from 68.61 to 67.25 cents.

Volume quickened to an estimated 28,774 lots from 15,436 lots the prior session when spreads accounted for 8,192 lots or 53%, EFS 100 lots and EFP 34 lots. Options volume rose to 6,515 lots (2,478 calls and 4,037 puts, up from 4,298 lots (1,273 puts and 3,025 puts).

U.S. all-cotton production is forecast at 21.115 million bales, down 643,000 bales or 3% from last month’s forecast but up 23% from last season’s 17.17 million bales.

The cut from last month was in upland production, reduced to 20.388 million bales, with estimated Pima or extra-long staple output carried forward at 727,000 bales, up 28% from 569,000 bales in 2016.

Production prospects fell largely in Texas and Georgia, dropping 300,000 bales each to 9 million and 2.4 million bales, respectively.

Yields are expected to average 889 pounds per harvested acre, down 19 pounds from last month but up 22 pounds from last year and 50 pounds from the five-year average.

If realized, the yield forecast will be the second highest on record. The acres-for-harvest estimate was shaved 100,000 acres from a month ago to 11.41 million, reflecting an abandonment of 1.21 million acres or 9.6%.

The USDA trimmed its export forecast 400,000 bales to 14.5 million on reduced U.S. production and strong competitor shipments. Domestic mill use was unchanged from last month at 3.35 million bales.

Ending stocks are projected at 5.8 million bales, down 200,000 bales from last month. The resulting stocks-to-use ratio of 32.5% is virtually unchanged from the September forecast of 32.9%, up from 15.1% last season and the highest since 2008-09.

The forecast range for the marketing year average farm price is 55 to 65 cents, up a penny on the bottom end and down a penny on the top end. This left the midpoint unchanged on the month at 60 cents, down from last season’s 68-cent average.

Global supply-demand forecasts showed relatively small adjustments from September. Production increased 110,000 bales to 120.86 million, with larger expected crops in Argentina, Brazil and Greece more than offsetting the reduction forecast for the United States.

World cotton consumption gained 260,000 bales to 118.01 million, driven primarily by a 250,000-bale increase to 6.2 million in Vietnam. A 440,000-bale expansion foreseen in world cotton trade reflected gains in India, Australia and Brazil that more than offset lower expected U.S. exports.

Global ending stocks dipped 160,000 bales from a month ago to 92.38 million, up 2.81 million from beginning stocks. Projected ending stocks for China remained at 39.47 million bales, down 8.95 million from a year earlier. Stocks in the world outside China are projected at 51.23 million bales, against a record 53.07 million foreseen last month.

Futures open interest gained 595 lots to 230,069 on Wednesday, with December’s down 646 lots to 125,532 and March’s up 852 lots to 71,510. Certified stocks grew 671 bales to 6,674. There were 1,029 newly certified bales and 358 bales decertified.

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Ernst Undesser
By Duane Howell DTN Cotton Correspondent October 12, 2017