The US issued a surprise upgrade to its forecast for cotton stocks, but cut its estimate for world inventories nonetheless, limiting the pressure on New York futures in the fibre.
The US Department of Agriculture, in its monthly Wasde crop report, raised by 300,000 bales to 6.10m bales its forecast for domestic cotton inventories at the close of 2017-18.
The upgrade in the stocks estimate, to a nine-year high, contrasted with investor expectations of a cut to the figure, to 5.6m bales.
And it reflected an increased estimate for production, pegged at an 11-year high of 21.38m bales, despite some ideas of crop damage from hurricanes Harvey and Irma.
“A smaller crop in the west [of the US cotton belt] is more than offset by gains in the Southwest and other regions,” the USDA said, upgrading its estimate for the average US cotton yield this year by 11 pounds per acre to a record 900 pounds per acre.
Price upgrade
Nonetheless, the USDA raised by 3 cents a pound to 60-66 cents a pound its forecast for US farmgate cotton values in 2017-18, “reflecting prices to date”, which have found support in a strong pace of orders for US exports.
Separate USDA data on Thursday showed US cotton export commitments – that is, sales and completed shipments combined – at 8.91m bales for this season, up 36% year on year.
And at a global level, the USDA cut its forecast for inventories by 1.50m bales to 90.9m bales, a far bigger cut than expected by investors, who had pencilled in a 91.6m-bale figure, according to a market poll.
Demand upgrades
The extent of the downgrade to the world stocks figure reflected in part historical revisions for estimates for stocks in the likes of Argentina and Uzbekistan, but also increased consumption estimates for this season.
“World 2017-18 consumption is forecast 1.2m bales higher than last month, with increases of 300,000-550,000 bales in the forecasts for Uzbekistan, China, and Bangladesh,” the USDA said.
“Higher global production in several major producers is more than offset by higher use.”
Cotton futures for December stood 0.5% lower at 68.29 cents a pound in late deals in New York.