DTN Cotton Close: Settles Mostly Higher

December matched its contract high close. Fed held interest rates steady. World cotton consumption expected to grow steadily through 2018-19 and exceed production despite an increase in planted area, ICAC report indicated.

Cotton futures settled higher beyond maturing May Wednesday, with July edging up to its highest close since April 20 and December matching its contract high finish.

July closed up 20 points to 84.68 cents, around the middle of its 97-point range between 84.13 cents and 85.10 cents. May, which goes off the board on Tuesday, settled down 11 points at 85.01 cents.

December gained 63 points to finish at 79.43 cents, a couple of ticks off the high of its 70-point range and even with its contract high settlement on April 20. Its contract high of 79.90 cents was on April 23.

The Federal Reserve held short-term interest rates steady and indicated it remains on track to raise them gradually in coming months to keep the expanding economy on an even keel, Dow Jones Newswires reported as cotton futures neared the close.

The Fed, in a statement released after its two-day policy meeting, offered nothing to dispel market expectations that it will deliver its second rate increase of the year when it meets in June.

Traders awaited the U.S. weekly export-sales shipments report on Thursday. Some trader expectations for upland sales for shipment this season range all the way from 175,000 running bales to 350,000 running bales.

Volume rose to an estimated 23,300 lots from 21,911 lots the previous session when spreads accounted for 7,106 lots or 32% and EFP 15 lots. Options volume increased to 7,923 lots (4,815 calls and 3,108 puts) from 6,917 lots (3,038 calls and 3,879 puts).

World cotton consumption is expected to grow steadily through 2018-19 and exceed production despite an increase in planted area resulting from higher prices, the International Cotton Advisory Committee’s supply-demand estimates indicate.

“World area under cotton has averaged 32.4 million hectares (one hectare equals 2.471 acres) over the last 10 years and is projected to grow moderately during the next season,” ICAC says.

Global cotton prices have averaged 84.63 cents per pound this far this season, according to ICAC, compared with 83 cents last season as measured by the Cotlook A Index.

While plantings are expected to increase in the United States, drought remains a concern in the West Texas Plains, ICAC pointed out, adding that this area represents about 25% of the production. Planted area in India is expected to decrease to 11.9 million hectares, ICAC said, and the cotton area in China to remain stable based on continuation of government support policies.

Converting the ICAC estimates to 480-pound bales from metric tons, world production is projected to dip to 117.95 million in 2018-19 from 119.28 million this season, while consumption is forecast to rise to 122.68 million from 117.07 million. Mill use would rise to 4.73 million bales over production from 2.21 million below it.

Global cotton trade is forecast to rise to 42.44 million bales from 39.96 million bales, but ICAC noted that import tariffs remain a potential concern. China’s imports are projected to increase for the fourth consecutive year, rising to 6.43 million bales, with Bangladesh remaining the leading importer and the United States the leading exporter.

World ending stocks are forecast to drop to 83.96 million bales from 88.69 million bales, with the stocks-to-use ratio falling to 68.4% from 75.8%.

Meanwhile, certified stocks grew 428 bales to 73,713 bales. Open interest expanded 1,858 lots to 270,245 lots on Tuesday, with May’s down 17 lots to 18 lots, July’s up 1,334 lots to 137,180 lots and December’s up 662 lots to 107,245 lots.

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