Projections for world ending stocks for the 2017/18 crop year were at 92.5 million bales, 3 million above their 2016/17 level, as per the latest World Agricultural Supply and Demand Estimates (WASDE) report. Projections were raised for several countries, led by the United States and India.
US cotton output is seen at 21.76 million bales for 2017/18 compared with 20.55 million bales projected last month, the report showed. ICE cotton futures plunged over 4 percent on Tuesday, the biggest one-day fall in a month. Tuesday's price move prompted the ICE Futures US exchange to expand the daily trading limit for all Cotton No. 2 futures to 4 cents per lb, effective with the start of trading for Wednesday. But on Wednesday, the limit was revised back to 3 cents per lb, effective Thursday.
"The domestic production estimate did not include any adjustment for recent hurricanes. That's kind of tempered the market's stand," said Louis Rose, co-founder and director of research and analytics at Rose Commodity. "If the market truly believed that the US is going to make nearly 22 million bales there could have been another limit down today. The open interest shows that there was some liquidation of longs rather than new shorts," he said.
Total futures market volume fell by 5,718 to 36,962 lots. Data showed total open interest fell 1,986 to 243,886 contracts in the previous session. Certificated cotton stocks deliverable as of September 12 totalled 7,006 480-lb bales, down from 8,402 in the previous session.
Copyright Reuters, 2017