ICE cotton futures fell more than three percent on Monday on profit taking ahead of a monthly crop supply and demand report from the US government which is expected to show a large natural fibre crop. Market participants expected a big crop in Tuesday's World Agricultural Supply and Demand Estimates (WASDE) report despite the havoc created by Harvey in the top cotton producing state, Texas, and concerns of crop damage due to Irma in Georgia, the second major producer.
"In our opinion tomorrow's WASDE number will not reflect anything that happened recently, in fact there is a possibility that they could raise Texas based on the West Texas yields," said Jim Lambert, director of sales at FCStone Merchant Services. Cotton contracts for December settled down 2.48 cent at 72.11 cents per lb. It traded within a range of 71.59 and 75.45 cents a lb.
"Record carry-over inventories from marketing year 2016/17, record global production this year and potential for acreage increases in marketing year 2018/19 should put significant downward pressure on cotton prices," Societe Generale said in a note. "Global production this year should rise by 11 percent, primarily driven by a similar increase in global cotton acreage."
December prices slumped 3.32 percent, its biggest one-day percentage fall since the release of last month's WASDE report on Aug. 10. US 2017 crop production was 20.55 million bales as per the August report, 1.5 million above the previous month and the largest production in 11 years. "(The drop in prices) is because the damage (from storms) is still unclear, and a good US cotton crop is still expected overall. It also looks as if production in India could rise more sharply than expected to a good 30 million bales, which would be 3 million bales more than last year," Commerzbank analysts said in a note.
ICE cotton futures, however, touched a contract high of 75.75 cents per lb on Friday. Meanwhile, speculators raised their net long position in cotton by 22,622 contracts to 54,710 contracts in the week to Sept. 5, US government data showed on Friday. This was the largest bullish position since June 16.
Total futures market volume fell by 2,212 to 33,679 lots. Data showed total open interest gained 5,289 to 246,407 contracts in the previous session. The dollar index was up 0.55 percent. The Thomson Reuters CoreCommodity CRB Index, which tracks 19 commodities, was up 0.27 percent.