US cotton futures closed lower on Tuesday, erasing earlier gains, as fibre prices hit technical selling after piercing a nine-day moving average. The most-active December cotton contract on ICE Futures US settled at 70.10 cents per lb, down 0.30 cent or 0.40 percent.
Prices were in a narrow range of just over 1 cent for a fourth straight session, with little fundamental news to move the market in either direction. Prices bucked a broadly stronger commodities market fuelled by a rally in oil and gold. Pressure will remain on the front-month prices as the Goldman Sachs index roll starts Wednesday. Investors were also cautious about placing new bets ahead results for the closely-run US Presidential election.
Later in the week, the market awaits the US Department of Agriculture's monthly crop report. Coming a quarter of the way through the US harvest, the supply outlook is increasingly clear, but uncertainty over demand from China, the world's largest consumer, is mounting. Last month, the USDA reduced exports in several countries including the United States as imports by China were trimmed due to its larger crop and smaller mill usage.
"This crop year is entering the start of its second quarter with production and therefore supply approaching a definitive number, but we can not say the same for demand and by extension carry-out," said Sharon Johnson, senior cotton specialist at Knight Futures. Chinese mills are expected to increase imports, but not until after February in the second half of the season, which ends in July, she said.
The market has grown more bearish after the USDA increased supply estimates and cut demand forecasts over the past three months. The USDA expects global stocks by the end of July next year to hit a record at just below 80 million bales. In the United States, supplies will total some 20.34 million bales, including stocks from last year's season of 3.35 million bales and crop of just under 17 million bales, Johnson said. That is up 220,000 from her previous estimate, but 300,000 below the government's last forecast given in October. It is the third highest of the past five years, but at the low end of the past 12 years, she said.
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