U.S. 2016-17 ending stocks projected at the largest since 2008-09, while the 2015-16 export forecast cut 500,000 bales. Global 2016-17 production estimated 6.4 million bales below consumption.
Cotton futures fell to a new low for the move Tuesday on the heels of U.S. 2016-17 supply-demand forecasts showing ending stocks growing to the largest in eight years.
Spot July closed down 43 points to 60.90 cents, near the low of its 137-point range from up 64 points at 61.97 cents to down 73 points at 60.60 cents. It finished at a new low close since April 15.
December settled down a modest 13 points to 60.91 cents, reversing off a three-session high and closing even with last weekΆs low after trading within a 114-point range from up 61.68 to 60.54 cents. It also closed at its lowest finish since April 15 but ticked last at 61.17 cents.
Surging U.S. equities, rebounding oil prices, sharply higher soybeans and soybean meal and gains in grains may have helped restrain cotton losses.
Volume quickened to an estimated 36,914 lots from 24,954 lots the previous session when spreads accounted for 10,672 lots or 43%. Options volume totaled 8,574 calls and 5,224 puts.
A projected 2016-17 U.S. crop of 14.8 million bales, up 15% from this seasonΆs final production, is expected to boost next seasonΆs ending stocks well above the beginning level to 4.7 million bales, USDA said.
Those would be the largest ending stocks since 2008-09. The crop forecast is based on the March prospective plantings of 9.6 million acres, below-average abandonment of 7.95%, relatively favorable moisture and average yields of 807 pounds per acre.
A survey of cotton analysts by The Wall Street Journal had shown average estimates of 14.6 million bales for the crop and 4.4 million bales for ending stocks.
The USDA projected exports to rise to 10.5 million bales on higher available supplies and more marketable qualities, while domestic mill use is expected to hold steady at 3.6 million bales.
For 2015-16, the U.S. export forecast was reduced 500,000 bales to 9.5 million, reflecting lower-than-expected sales thus far, with ending stocks raised accordingly to 4 million bales.
The stocks-to-use ratio is projected to rise to 33.3% in 2016-17 from an upwardly revised estimate of 31.7% for this season. The April forecast for 2015-16 was 26.7%.
Globally, production is projected 6.42 million bales shy of mill use in 2016-17, compared with an estimated shortfall of 9.48 million bales this season, with the world stocks-to-use ratio expected to decline to 87.1% from 94.3% now foreseen for 2015-16.
World production is expected to rise nearly 5% to 104.36 million bales, despite a marginally lower planted area, as yields recover from weather and pest pressure that affected crops in 2015-16.
Production is expected to rise mainly in Pakistan, the Unites States, India and Turkey, partially offset by a 1.3-million-bale reduction to 22.5 million foreseen for China.
World cotton consumption is projected to rise 1.6% to 110.78 million bales as prices remain low and mills in China gain access to domestic cotton at more competitive prices.
Global cotton trade is expected to decline slightly from 2015-16 to 33.1 million bales as increased production, especially in Pakistan, reduces reliance on imports.
World ending stocks are projected to decline 6.2% to 96.48 million bales. Falling stocks in China exceed the projected global decline, while stocks outside China show a slight increase to 39.76 million bales. ChinaΆs stocks are equivalent to nearly 170% of its total cotton offtake.
Futures open interest fell 1,342 lots Monday to 187,985, with JulyΆs down 2,676 lots to 104,635 and DecemberΆs up 1,346 lots to 66,932. Cert stocks grew 473 bales to 69,070 bales. Awaiting review were 5,814 bales, including 655 bales at Dallas-Fort Worth and 5,159 bales at Memphis.
