Wednesday, 11 November 2015 00:20
NEW YORK: ICE cotton rose but quickly reversed gains on Tuesday after the U.S. Department of Agriculture reduced its forecast for U.S. output along with lowering its outlook for world production and ending stocks in its monthly supply and demand report.
March cotton on ICE Futures U.S. was down 0.2 percent at 62.02 cents a lb as of 12:44 p.m. EST (1744 GMT).
The USDA lowered its forecast for world inventories at the end of the 2015/16 season, which ends in July, to 106.09 million 480-pound bales, down from its 106.97 million projection last month.
This was primarily due to a 1.75 million-bale reduction in its expectation of world output to 105.63 million bales, driven by significant cuts in its outlook for production in India and Pakistan, whose crops have suffered from disease and unfavorable weather conditions.
Prices jumped briefly on the updated outlook, with the March contract rising as much as 1.4 percent to 63 cents a lb immediately following the report’s publication, before reversing gains and turning negative.
The USDA lowered its forecast for global demand to 111.59 million bales, down from 112.27 million last month, and traders felt the true declines may be even steeper given the low levels of physical demand, said Peter Egli, director of risk management with British merchant Plexus Cotton.
“With numbers like that, we should not be unchanged to down, we should be up,” Egli said. “Demand is unbelievably slow right now.”
In the report, the USDA slightly lowered its outlook for U.S. production to 13.28 million bales, down from 13.34 million last month, but kept its outlook for exports and ending inventories at 10.2 million bales and 3.1 million bales, respectively.
