US cotton futures lost 2.5 percent of the value by the close on Friday, as price momentum stalled following a near 30-cent rally in front of the government's final estimate of 2010/2011 crop. "Why the hell were we up in the first place?," asked Jobe Moss of MCM Inc in Lubbock, Texas.
"There's nothing about the old crop that we don't know." The US Department of Agriculture's monthly supply/demand report cut the estimate of the US cotton crop by 215,000 (480-lb) bales to 18.1 million bales, while raising domestic consumption by 100,000 bales.
These adjustments dropped ending stocks to an all-time low at 1.6 million bales, equivalent to 8 percent of total usage, Mike Stevens, an independent analyst in Louisiana said in a daily market comment. "This just reinforces the fact that we are out of cotton. It also keeps us aware that should production problems develop most anywhere, prices could explode once again," he said. The key May cotton contract on ICE Futures US tumbled 5.25 cents or 2.5 percent to settle at $2.0297 per lb, near the lower half of its $2.0125 to $2.1240 session range.
Dealers cited profit-taking from the near 30-cent run-up in prices this week. The new-crop December cotton contract edged up 0.14 cent to $1.3808. Total volume traded in the cotton market was around 27,700 lots, about 16 percent above the 30-day norm, Thomson Reuters preliminary data showed. The level of investor interest remained firm, poking above 200,000 lots for the first time since early February, ICE Futures US data showed.
Last month, the benchmark May contract shot to an all-time high at $2.197 per lb, driven by tighter global supplies and concerns that plantings in the United States could be reduced further if a drought in Texas caused by the La Nina weather pattern worsened. The USDA crop report reinforced market-wide perceptions of a tighter supply base in the United States.
Texas is expected to plant about half of the US cotton crop. USDA also reduced world 2010/11 cotton ending stocks to 41.55 million (480-lb) bales from 42.33 million last month and raised world 2010/11 cotton consumption to 117.12 million bales against 116.61 million bales. Looking ahead, traders await the first estimates for the 2011/12 cotton season in the USDA's May production report. The market has already digested the USDA's estimate of US cotton sowings and players are keeping an eye on the very dry conditions in the top growing area of Texas, which is expected to plant about half of the US cotton crop.
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