Doane Cotton Close: Triple-Digit Losses on Disappointing Exports

    Most of the market chatter focused on the triple digit decline in old crop following disappointing export sales for the week. They were indeed below expectations, but we’d remind everybody that sales YTD have a nice “cushion” on the order of 220,000 bales ahead of where they need to be to reach USDA’s current export forecast of 10.7 million for 2013/14. In fact, that’s precisely why the cotton market reacted negatively to USDA’s failure to RAISE the export forecast in yesterday’s April WASDE update.

    What I find most noteworthy about today is that new crop futures not only finished higher for the day, completely ignoring old crop price pressure, the December contract took out last month’s high. That preserves and revitalizes the uptrend in new crop futures. And I find it particularly encouraging in light of improving rainfall forecasts for Texas cotton country late next week. Here’s a look at the December chart after today’s close:


    U.S. BALANCE SHEET CHANGES: Market reaction neutral to mixed. Prior to release, trade estimates of U.S. ending stocks averaged 2.5 million bales, down 300,000 from March and ranging from 2.4 million to 2.8 million. USDA’s actual figure came in as expected at 2.5 million bales. Exports were left unchanged but the crop estimate was reduced by 320,000 bales, largely expected following last month’s ginnings report. The “residual” factor was dropped by 20,000 bales, however, for a net decrease in ending stocks of 300,000. USDA’s forecast avg farm price range was raised by 1 cent per lb. on each end, to 76-79 from 75-78 in March.

    GLOBAL BALANCE SHEET CHANGES: Globally, USDA raised ending stocks slightly, to 96.92 million bales from 96.75 million in March. There were only modest adjustments across each line item; beginning stocks were raised by 499,000 bales, but production was lowered by 60,000 and global usage raised by 240,000 for a net increase in ending stocks of 170,000 or less than 2/10 of 1 percent. Among major importing countries, ending stocks rose 1.1 million bales, with China accounting for 1 million. Among exporting countries, ending stocks declined 680,000, primarily among southern hemisphere producing countries (S. America, Africa, Australia).

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