Cotton prices settled slightly higher in choppy trading on Friday after the US government issued a smaller-than-expected forecast for US acreage dedicated to the fibre in the upcoming 2013/14 season. Cotton ended the quarter down 4 percent, its worst quarterly performance in a year, after hefty losses in April and May when speculative investors unwound bullish bets as China's buying waned and concerns about tightening supplies subsided.
The market has fared better since, recovering some of the losses in June as worries supplies in the upcoming season which starts on August 1 resurfaced. Farmers have planted their smallest cotton crop since 2009 and traders say a merchant has bought a big portion of the exchange certified stock.
On Friday though, gains were capped by plunging grain markets. Corn sank more than 5 percent to its lowest in more than a year after the US Department of Agriculture said farmers planted 2 million acres of the crop than expected. "I think grains/soybeans are having a negative effect," said Sharon Johnson, cotton specialist at Knight Futures. The most-active December futures representing the 2013/14 harvest settled up 0.13 cent, or 0.15 percent, at 84.01 cents per lb. The July contract, which expires on July 9, settled at 82.71 cents per lb, down 0.42 cent, or 0.5 percent. In its final assessment of the spring planting, the USDA raised its estimate for cotton to 10.251 million acres, up from a March assessment of 10.026 million.
Johnson said the increase was slightly less than most market participants had expected. The new estimate is still the smallest acreage since 2009 - when less than 10 million acres of cotton were planted - confirming expectations that farmers will grow one of their smallest crops in decades in the season that starts August 1. Many growers have switched to higher-priced grains, and traders worry about big abandonment rates in the Southwest where crops are suffering from drought.
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