Fed raised interest rates and signaled it remains on track to keep tightening. U.S. dollar initially fell sharply. ChinaΆs February cotton imports jumped 146% from a year ago.
Cotton futures settled on a five-session high close in May Wednesday, bolstered partly by higher Chinese imports, a weaker U.S. dollar index and broad gains in commodities ahead of the U.S. weekly export sales report.
May finished up 93 points to 78.08 cents, in the upper quarter of its 109-point range from up two points at 77.17 to up 111 pints at 78.26 cents. It posted the low just after the overnight opening, the high around 9 a.m. CDT and closed above highs of the previous three sessions.
July settled up 90 points to 79.09 cents, trading from 78.21 to 79.22 cents. December ended up 32 points to 75.35 cents, trading from 74.96 to 75.44 cents and finishing 10 points shy of its contract high close.
The Federal Reserve said it would raise short-term interest rates and remained on track to keep lifting them this year, signaling the central bank is moving into a new policy phase as the economy strengthens, Dow Jones Newswires reported shortly before the cotton close.
Fed officials said they would increase their benchmark federal-funds rate by a quarter percentage point to a range between 0.75% and 1% and expects to continue raising it gradually if the economy performs in line with their forecast.
As in December, officials penciled in three quarter-point rate increases this year, implying two more after the move this week.
The Fed statement noted the pace of economic expansion is just “moderate” and did not signal, as some had expected, more than two additional rate increases this year.
U.S. stock indexes initially rose and Treasury yields fell, indicating markets at first blush interpreted the statement as dovish. U.S. dollar index futures fell sharply.
Cotton volume rose to an estimated 19,927 lots from 16,903 lots the previous session when spreads accounted for 1,031 lots or 42%, EFP 154 lots and EFS 54 lots. Options volume increased to 9,594 lots — 6,961 calls and 2,633 puts — from 1,402 lots.
China imported 138,100 metric tons of cotton (634,281 480-pound bales) in February, up 20% from the prior month and a bulging 146% from a year ago, customs data showed.
This brought the total for the first two months of the calendar year to 253,500 tons (1.164 million bales), up 67% from the year-earlier pace. Imports for the first seven months of the 2016-17 marketing year rose to 622,300 tons (2.858 million bales).
The 2016-17 imports stood at 64% of the USDA estimate of 4.5 million bales, up from 4.41 million last season. Talk has circulated that the import pace now may slow in the face of sales from ChinaΆs reserve stocks which resumed this month and are to continue through at least Aug. 31.
Meanwhile, some expectations for the U.S. weekly export sales report, scheduled for release by USDA at 7:30 a.m. CDT on Thursday, have ranged on either side of the 248,900 running bales of upland sold the prior week ended March 2 for delivery this season.
Net upland sales the last four weeks have averaged 329,900 RB. Upland shipments, which surged to a whopping marketing year high of 529,000 RB the last reporting week, have climbed to a four-week average of 383,400 RB.
Futures open interest declined 403 lots Tuesday to 274,706. MayΆs OI dropped 921 lots to 158,887, JulyΆs edged up three lots to 47,914 and DecemberΆs rose by 578 lots to 60,155. One lot remained open in matured March, where the last notice day is Thursday. Notices have totaled 277.
Stocks in deliverable position remained at 325,928 bales for the fourth consecutive day. No cotton awaited review.
