Cotton futures tempered gains after US officials cut their forecast for domestic stocks of the fibre by less than investors had expected, thanks in part to an unexpected increase to the harvest estimate.
Cotton futures for March stood at 73.14 cents a pound in late deals in New York, up 0.2% on the day, but well below the level before the release of the US Department of Agriculture’s Wasde crop report, ahead of which the contract had stood 1.5% higher.
The Wasde cut the forecast for US cotton stocks at the close of 2017-18 by 300,000 bales to 5.80m bales.
However, this downgrade fell short of that expected by investors, who had forecast the stocks figure coming in at 5.70m bales.
‘Record high upland yield’
The discrepancy reflected in part an upgrade of 60,000 bales, to an 11-year high of 21.44m bales, in the forecast for US cotton output this year, rather than the 50,000-bale downgrade that traders had pencilled in.
“A record high upland yield is expected in Missouri and Arkansas and record high upland production is expected in Kansas, Oklahoma and Texas,” the USDA said, noting that the national yield of 902 bushels per acre would be “the highest on record”.
However, the USDA also, in raising its forecast for US cotton exports this season by 300,000 bales to 14.8m bales, issued a smaller upgrade than some investors had expected, given a strong pace of export sales.
The USDA acknowledged a “robust pace of [US] sales and commitments year-to-date and reduced foreign production”, but highlighted too for rival Brazil a “stronger-than- expected pace of trade to date, particularly in November”.