Cotton futures jump as USDA raises exports, trims output forecast
ICE cotton futures rose on Wednesday, en route to snapping a three-session long losing streak, on projections for higher U.S exports and lower output in 2020/21 of the fiber in a monthly federal supply and demand report.
The cotton contract for July rose 0.69 cent, or 0.8% to 88.44 cents per lb by 1:37 p.m EDT (1737 GMT), having risen as much as 2.3% earlier in the session.
"They tightened up the balance sheet for the U.S. pretty significantly, and that's definitely what gave the market that immediate boost," said Bailey Thomen, cotton risk management associate with StoneX Group.
"They lowered production and also raised exports, and that was a really nice figure to see," Thomen added.
The U.S. Department of Agriculture, in its May World Agricultural Supply and Demand Estimates (WASDE) report, raised estimates for U.S. exports by 500,000 bales to 16.25 million bales for the 2020/21 marketing year. The higher exports forecasts brought ending stocks estimates down to 3.3 million bales. ...
The report also projected U.S. cotton production in 2021/22 to rise 2.4 million bales, but saw total supply at its lowest in five years, and forecast both exports and ending stocks lower than in 2020/21.
But the market is still tracking the weather situation in West Texas to decide whether the new crop estimates are feasible or not, analysts said.
"Any change in the weather plus the acres could have a dramatic impact on the prices," if there is no improvement in rainfall in key regions in the near-term, said Jobe Moss, a broker with MCM Inc in Lubbock, Texas.
The WASDE report also noted India's recent textile exports and economic disruption from COVID-19 which it said reduced expected mill use in the key producer and consumer by 800,000 bales, pushing the global consumption forecast 439,000 bales lower this month.