Cotton prices enter holidays lower
Wednesday’s Trading Activity – US cotton futures opened down substantially Tues evening and within an hour or two locked limit down in the front month and pulled the next two old crop months accordingly.
Despite the US limit up close on Tues, Chinese values failed to follow-through as has been the case the past week or two and ultimately was down at the CNCE and ZCE although the CCI was up slightly. In addition, yarn prices slipped as did polyester and the combination proved to be too much for US futures after rallying 48 cents in 4 weeks basis March 11. Plus, the March cotton futures contract was extraordinarily over bought having been up an average of 362 pts in 13 of the past 17 business days with very little correction.
With the issue of India’s imports clearer and the likelihood of additional cotton being released at some point over the next few weeks, traders are less nervous about supplies and therefore less anxious to own futures at such high price levels. Actual futures volume was a low holiday-induced 10,935 contracts with open interest down 2,001 to 200,336 with the March down the most likely due to the 1,385 EFP/EFSs from Wednesday. Cert stocks are down 3,675 to 125,134 with nothing under review.
NEWS/REPORTS/MISC US Exports – Weekly sales due mostly to purchases by China were stronger than expected with 326K bought the week ending Dec 16. Other buyers included Turkey and Thailand. Commitments have now risen to 13.88 mln running bales, 91% of the USDA equivalent estimate of 15.29 mln (15.75 mln statistical) bales. Shipments were nearly identical to the week before with 329K leaving US ports/borders headed for in descending order China, Turkey, Indonesia, Vietnam, Mexico, Colombia, Thailand and Guatemala. After 21 weeks, 3.68 mln running bales have been shipped or 24% of Washington’s target. In the remaining 31 weeks, shipments must average 375K to obtain the current projection. There were also new crop sales of 61K attributed to purchases by Thailand, Egypt and Indonesia. 2011/12 sales total 1.56 mln bales, not overly high as the mid-point of this crop year approaches.
US November Cotton Consumption – The Census Bureau released domestic consumption for the month of November (Oct 31-Nov 27) this morning with a preliminary figure of 274,042 running bales, 28,540 below October but 8,222 higher than in Nov 09. The seasonal adjustment figure for the past two months was 13,842 and 14,017 bales. After 4 months, US mills have consumed 1,214,054 running bales vs a year ago of 1,069,133, a 13.6% gain. One note though, domestic mills have been using cheaper priced cotton from the 2009 crop year in Aug/Sept and possibly some of Oct and only began consuming new crop mid-Oct forward that was purchased well before the huge run-up occurred so the stronger consumption numbers are not much of a surprise.