A benign weather outlook for the southern US put the
dampeners on a revival in cotton futures spurred by the "rude shock" of data showing
that the country's sowings of the fibre had risen less than had been thought.
US cotton futures for December eased back 0.3% to 68.37
cents a pound in early deals on Monday, reversing some of their hefty gains in
the last session.
The pullback followed a weekend which brought many areas of
the southern US cotton belt the rainfall forecasted - unlike the Corn Belt
further north, where precipitation failed to materialise as expected.
Indeed, parts of Texas, the top US cotton-producing state,
received up to 4 inches of rain, WxRisk.com, which added that the precipitation
spilled over into Arkansas and Oklahoma too.
And looking ahead, showers will "keep moisture adequate for most Deep
South corn, soybeans, cotton the next two weeks", said Commodity Weather Group,
foreseeing "seasonable temperatures" too.
At Rose Commodity Group, Louis Rose said that the key western
Texas cotton-growing area "has slight to moderate chances of rain within near-
to medium-term weather forecasts while the Mid-south and South East are
expected to receive significant rainfall this week".
Still, futures remained well above levels before the US Department
of Agriculture on Friday, in a much-anticipated report on domestic crop sowings
this year, pegged plantings at 12.06m acres, down 178,000 acres on an estimate
made three months ago.
"West Texas was largely responsible for the debit to the planted
acreage estimate for June versus March," Mr Rose said.
The downgrade surprised investors, who had expected the sowings figure
to be upgraded, to 12.28m acres, and sent December futures up 2.0% in the last
"This report seemed to be a rude shock for many," said
traders at Ecom, adding that "the bulls took this worse-than-predicted number
by the horns and ran with it.
"And by the looks of the trade flow after the release there
was many soft shorts who were expecting a better number liquidating their
positions and running for the exit."
'Bullish', but only 'slightly'
In production terms, the revised acreage number, up more than 20%
year on year, implied a US harvest this year of about 18.35m bales, Mr Rose
This is "significantly less than" the 19.20m-bale forecast
that the USDA has been working with.
However, Mr Rose also said that an 18.35m-bale harvest was "not
a compelling bullish figure", remaining well above last year's 17.17m-bale crop.
Rabobank, terming Friday's data "slightly bullish", said
that the rise in sowings was still enough to foresee "massive US supplies"
Assuming low crop abandonment levels, US cotton production "could
be at 10-year highs", the bank said.
Ecom said that "acres planted is still up 20% from last year
and therefore seems like a slightly bearish number for futures on that
"However, the demand side looks to be increasing as well,"
with US cotton export data remaining buoyant.