Cotton Declines as Heavy Supply Surpasses Demand for U.S. Crop

By Carolyn Cui Features Dow Jones Newswires

Cotton futures slipped Friday as concerns over bulging stocks overwhelmed strong export demand for U.S.-grown fiber.

Continue Reading Below

In New York, cotton for December delivery declined 0.2% to 68.25 cents a pound at the ICE Futures U.S. exchange.

Cotton had tumbled more than 20% after hitting a peak on May 15, as speculators became concerned about the large U.S. crop and began to take profits. Over the past few sessions, prices having been moving sideways.

The International Cotton Advisory Committee said this week it expected the world ending stocks to decline by 1% to 17.1 million tons in 2017/2018. China's stocks are expected to decline by 18% to 7.6 million tons, and its share of world stocks is expected to decline to 44%, the first time since 2011/2012 that it has held less than half of global stocks.

However, stocks held outside of China are expected to rise by 17% to 9.6 million tons. "This would be one of the highest volumes on record and indicate that prices should fall," the ICAC said.

During the six weeks between May 16 and June 27, speculators had sold a total of 8.04 million bales net, reducing their net long from 10.85 million to 2.81 million bales, and thereby forcing the market lower, according to Plexus Cotton.

Continue Reading Below

There was "an almost perfect correlation between the selling of speculators and the market's downtrend," Plexus Cotton said.

Cotton prices appeared to have found a floor, as overseas demand for U.S. cotton remained robust. On Friday, the U.S. Department of Agriculture reported that net sales of upland cotton reached 194,200 running bales during the week ended June 29, down 26% from the previous week, but up 34% from the prior four-week average. For the 2017/2018 crop, a total of 4.5 million bales of cotton were already sold in the exports market.

"We have seen sales all across the board; that's pretty telling of good demand," said Louis W. Rose, founder of Rose Commodity Group.

Some analysts said that the market overestimated how much cotton would be available for shipment in the fourth quarter. With strong export sales, the USDA is expected revise down its estimate of the ending stocks of cotton in the U.S. in the upcoming month report, which is scheduled to release next week.

In other markets, raw sugar for October was down 0.3% at 13.88 cents a pound; cocoa for September fell 2.7% to $1,876 a ton; arabica coffee for September delivery lost 0.7% to $1.2815 a pound; and frozen concentrated orange-juice futures for September were down 2.9% at $1.3280 a pound.

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

July 07, 2017 11:59 ET (15:59 GMT)