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Cotton Soaring on USDA Forecasts

July 14, 2016 at 11:41 by Brent Lantzy

The Cotton: World Markets and Trade report released by the USDA on Tuesday sent cotton soaring to its 300 cent daily up limit. The most actively traded December cotton contract on the ICE has had a stunning week, reaching a high of 74.78 cents per pound on Wednesday, a two year high, before closing at 73.15, still the highest level in a year. The contract has soared 15% from Friday through Wednesday, the largest 4 day gain in over four years.

The past two years have seen cotton prices maintaining a relatively steady range between Mickey Mouse Clubhouse Bounce House 60 and 65 cents per pound, mainly due to huge stockpiles in China and declining global production.

The report startled investors as the USDA increased its 2016/17 estimate for US cotton exports to 11.5 million bales. The estimate for US ending stocks was lowered from 4.8 million bales to 4.6 million bales. The US production estimate has been increased by 1 million bales to 15.8 million.

Estimates for world cotton inventories at the close of 2016/17 were lowered to 91.3 million bales, mainly due to a lower estimate for ending inventories in China, where the government has had success in depleting huge state stockpiles.

The USDA also cut the forecast for Indian and Pakistani 2016/17 cotton production by 0.5 million and 1 million bales respectively due to concerns over disease, pests, and weather conditions.

The Cotlook ‘A’ Index stood at 81.50 as of 13:30 GMT on July 13.

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