Market shrugged off import jump in China last month. Increased competition for U.S. exports expected in 2017-18.
Cotton futures fell to a triple-digit closing loss for a second day in spot July Tuesday, finishing below lows of the prior seven sessions.
July lost 117 points to settle at 77.22 cents, near the low of its 133-point range from up four points at 78.43 to down 129 points at 77.10 cents. Key technical support is seen at ThursdayΆs low of 76.17 cents, from whence July rebounded 11.01 cents to MondayΆs new contract high.
December dropped 64 points to close at a nine-session low finish at 72.37 cents, in the lower quarter of its 88-point range from 73.10 to 72.22 cents. It has closed lower four sessions in a row and in five of the last six.
Volume increased to an estimated 30,560 lots from 23,043 lots the prior session when spreads accounted for 11,250 lots or 49% and EFP 168 lots. Options volume edged up to 6,300 lots (1,552 calls and 4,748 puts) from 6,128 lots (3,404 calls and 2,724 puts).
The market shrugged off reports that China imported 105,170 metric tons of cotton (483,037 480-pound bales) in April, up 50.3% from a year ago. This brought the total for the calendar year to 480,296 tons (2.206 million bales), up 71.8% from last year.
The USDA this month raised its estimate of ChinaΆs 2016-17 imports for the marketing year ending July 31 by 300,000 bales from its April forecast to 4.8 million, up 8.8% from last seasonΆs 4.41 million bales. The increase indicated more import quota will be used than previously expected.
ChinaΆs 2017-18 imports are forecast by USDA to increase only slightly to 5 million bales as BeijingΆs policies remain aimed at reducing the government-owned cotton stockpile.
Stocks in China are projected to fall for the third consecutive year, dropping about 9 million bales to 39.65 million, amid the ongoing stream of state reserve sales.
However, despite aggressive reserve sales and a continuing recovery in consumption, the carryover in China is expected to remain very high with a stocks-to-use ratio above 100% for the sixth consecutive year.
Global trade in 2017-18 is forecast at 37.6 million bales, up 2% from this season and the highest in four years. Increased trade largely reflects expanding mill use in import-oriented consumers such as Bangladesh and Vietnam, where combined imports are expected to increase by more than 1.5 million bales to 7 million and 6.2 million, respectively.
The initial country projections for global exports indicated increased competition for U.S. cotton as production expands in the major exporters. The U.S. 2017-18 export forecast of 7 million bales is a 3% reduction from the 2016-17 projection despite a larger crop.
For India, the second leading exporter, exports are forecast at 4.5 million bales, a 7% rebound from this seasonΆs relatively low level. Larger exportable supplies also will be available in Australia and Brazil, where exports are forecast up 500,000 bales to 4.3 million and 300,000 bales to 3.2 million, respectively.
Futures open interest declined 1,611 lots Monday to 251,732, with JulyΆs down 2,203 lots to 111,209, DecemberΆs up 75 lots to 119,927 and MarchΆs up 370 lots to 13,391.
Certified stocks grew 3,055 bales to 409,046, largest since July 8, 2014, when there were 417,912 bales in deliverable position. Awaiting review were 2,640 bales — 1,760 at Galveston and 880 at Memphis.
