US cotton spot futures price fell the most in almost a month on Friday as fresh concerns about the global surplus offset data that revealed fresh buying from China, the world's largest consumer and producer, and Pakistan. The most-active March contract on ICE Futures US slipped 1.43 cents, or 1.7 percent, to settle at 71.43 cents per lb in the holiday-shortened session.
"Cotton's just had its Black Friday sale," said a New York broker referring to the day after Thanksgiving when retailers offer discounts and deals, kicking off the US Christmas shopping season. The market is bracing for record inventory this season of over 80 million 480-lb bales due to sluggish demand and solid output. On Friday, the market focused on that looming surplus rather than fresh data that showed continued buying interest from China and Pakistan. Rising for a fourth straight week, export data from the US Department of Agriculture showed sales in the past week for the current marketing year were almost 400,000 running bales of upland cotton, with China and Pakistan accounting for half of the total.
That is up 8 percent from the previous week and is the highest since the end of June, when almost 800,000 bales were sold for the 2011/12 year which ended on July 31. The roll over ahead of first notice day on Friday and the expiry of the December contract kept pressure on December prices, brokers said. The bulk of the volume on the week was due to spread trading ahead of the December expiry and the first notice period on Friday evening.
The forward market continued to diverge from the spot, with the December-March spread spiking to 1.65 cents per lb, the highest for the spot and second month since May. It also took the market closer to carry, which would cover the cost of financing stock and reflects ample supplies as exchange stocks rise to levels no longer considered anaemic, traders said.
"That tells me there's going to be a lot more cotton coming. The world carry out cannot be ignored," said the broker. After falling as much as 8,000 bales earlier in the fall, fresh crops from this year's harvest are now arriving at the exchange. Certified stocks deliverable against the board rose by over 5,100 bales to 43,178 480-lb bales, with another 30,002 bales awaiting review.
If CFTC data shows speculators have held onto their net short position, the market could be prone to short-covering rallies though. The CFTC delayed publishing its latest data until Monday due to the US Thanksgiving holiday, but last week's data covering the week to November 13 showed hedge fund and other speculative investors had switched to being net short and built their biggest net short position since March 2009. Monday's data will cover the week to November 20.
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