ICE cotton futures fell over 1 percent on Wednesday and hit a four-week low, hurt by a partly bearish monthly crop supply and demand report from the US government and liquidation by speculators. ICE cotton contract for July settled down 0.94 cent, or 1.21 percent, at 76.49 cents per lb. It touched a session low of 76.36 cents a lb, a bottom since April 13.
"Part of the decline is we had large speculative positions in the market. ... They're not seeing any type of improvement in their position so they're starting to sell out some of their holdings," said Keith Brown, principal at cotton broker Keith Brown and Co in Moultrie, Georgia. The monthly World Agricultural Supply and Demand Estimates (WASDE) released by the US Department of Agriculture on Wednesday was probably neutral to a little negative, Brown added.
US cotton output is seen at 19.2 million bales and ending stocks forecast at 5 million bales for the 2017/18 crop year, compared with an estimated 17.17 million bales production and 3.20 million bales end-year inventories projected for 2016/17, as per the WASDE report.
Projections for world stocks for the 2017/18 crop year showed a decline by about 2.4 million bales, as consumption was seen exceeding output for a third straight season, the report added. "The market has allowed the more bearish-than-expected 2017/18 USDA supply and demand (estimates) to override the more bullish-than-expected 2016/17 report," said Louis Rose, co-founder and director of research and analytics at Rose Commodity Group.
The July cotton contract on ICE Futures US settled down 0.94 cent, or 1.21 percent, at 76.49 cents per lb. It traded within a range of 76.36 and 77.57 cents a lb.
Total futures market volume rose by 9,212 to 34,482 lots. Data showed total open interest fell 1,563 to 257,824 contracts in the previous session. Cotton planting in India, the world's biggest producer of the fibre, is likely to rise by 15 percent in the 2017/18 marketing season to a three-year high as farmers switch away from other crops, likely boosting cotton production and exports. China is expected to produce 4.88 million tonnes of cotton in the 2017/18 crop year beginning in September, up from 4.72 million tonnes a year ago, the agriculture ministry said on Wednesday.