A combination of factors forced cotton prices much lower this week, among them were USDA’s latest supply and demand report which forecast a larger U.S. crop and index fund rolling. In the four trading sessions ended Thursday at the Intercontinental Exchange (ICE), the December futures contract lost a combined 423 points, and March lost 386 points.
The freefall began Monday following the release of USDA’s November reports. Ahead of the reports, futures were trading on moderate gains before quickly reversing course. After trading as high as 65.77 cents per pound, up 181 points, December cotton settled at 62.43, down 153 points. Likewise, March, now the lead month, traded up to 63.70 cents, up 109 points, before settling at 61.32, down 129 points. Trading volume at ICE surged to 77,832 contracts, the fifth highest volume on record, according to one market newsletter.
In its November report, USDA raised its estimate of U.S. cotton production to 16.4 million bales, up 140,000 bales from the October estimate. Consequently, estimated U.S. ending stocks were increased as estimates for domestic consumption and U.S. cotton exports were unchanged from the previous month. The Texas crop was pegged at 6.4 million bales, up 150,000 from a month ago. Production on the High Plains was estimated at 3.745 million bales, up 50,000, and the Rolling Plains crop was pegged at 835,000 bales, up 45,000 from the October report. Oklahoma’s crop was estimated at 255,000 bales, and Kansas was pegged at 52,000.
USDA raised its estimate of world beginning stocks, production, consumption, and ending stocks for the 2014-15 marketing year. However, the department cut its estimate for Chinese cotton production by a half million bales and reduced the country’s domestic consumption by a like amount.
Tuesday’s ICE session was the only bright spot for cotton this week as a surge of late-day buying lifted cotton futures to positive ground. Volume remained strong as December cotton settled at 63.30 cents per pound, up 87 points, and March settled 21 points higher at 61.53.
Selling pressure increased Wednesday at ICE as first notice day for the December contract, Nov. 21, approached, and contracts ended near the bottom of their trading ranges. December settled 136 points lower at 61.94 cents per pound, and March settled at 60.34, down 119 points.
The bleeding continued Thursday as nearby contracts moved below 60 cents. December cotton settled at 59.73 cents, down 221 points. March established a new contract low before settling at 58.75, down 159 points, as spec fund rolling from December to March continued.
In other news, USDA reported net export sales of U.S. upland cotton totaled 158,300 bales in the week ended Nov. 6, up noticeably from the previous week and 88 percent from the four-week average. Indonesia, Egypt and China were the featured buyers. Export shipments for the week totaled 88,600 bales, up 36 percent from the previous week and 18 percent from the four-week average. China, Indonesia, Mexico, and Turkey were the top four destinations.
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