Source: Agfax.com

By Duane Howell DTN Cotton Correspondent

December 5, 2017

Indonesia’s cotton imports projected higher as rising fuel prices are expected to inhibit growth in synthetic fiber use. Cotton futures settled mixed Tuesday, unchanged to fractionally lower in 2017-18 marketing year deliveries and up 33 to 47 points in deferred contracts.

Most-active March finished down seven points at 72.51 cents, in the lower half of its 101-point range from down 44 points at 72.14 to up 57 points at 73.35 cents. It has continued to meander within Wednesday’s 171-point trading range.

Maturing December also settled down seven points, finishing at 74.96 cents ahead of its last trading day on Wednesday. It came into the session with an open interest of 35 lots and traded an estimated 35 lots. December 2018 closed up 41 points to 71.82 cents. Selling as U.S. stock market indexes approached the close had the Dow Jones Industrial Average down 120 points, while U.S. dollar index futures traded up 0.146 to 93.290.

Volume increased to an estimated 29,083 lots from 23,380 lots the previous session when spreads accounted for 8,247 lots or 35%, EFS 750 lots and EFP 87 lots. Options volume rose to 8,778 lots (6,886 calls and 1,892 puts) from 4,708 lots (2,809 calls and 1,899 puts).

Indonesia’s cotton imports are estimated higher in 2016-17 and 2017-18 as rising fuel prices are expected to inhibit growth in synthetic fiber use, says a U.S. agricultural attach report from Jakarta.

“At about 40%, the United States still holds the largest market share of imported cotton sales, and U.S. sales are up strongly in 2017,” the Foreign Agricultural Service report said. Cotton imports are estimated at 3.391 million bales in 2016-17 and 3.4 million bales in 2017-18, the report said, up from 2.941 million bales in 2015-16.

With competitive prices, U.S. exports grew significantly in 2016-17 and sales rose by almost 70% during the first nine months of 2017, the report said. In line with increases in cotton imports, textile and textile product exports have expanded slightly this year as demand from key markets rebounded.

Indonesia’s major export destinations for textiles are the United States (32.34% market share), European Union (14.97%) and Japan (10.08%). Demand for locally made textiles is declining because of competition from low-cost imports and weakening consumer purchasing power.

The post increased its estimate of 2016-17 cotton consumption to 3.34 million bales from the previous 3.3 million and projected 2017-18 mill use at 3.39 million bales. Cotton production is forecast to decrease to 3,000 bales this season from 5,000 bales in 2016-17.

The decline is because of farmers’ preference for other crops, increased land conversion to nonagricultural uses, low inputs, lax management and shortage of high-yielding seeds.

Domestic cotton production accounts for less than 0.25% of Indonesia’s total cotton use. Most cotton continues to be grown on marginal lands, the report said.

Futures open interest dipped 53 lots Monday, with December’s down 35 lots to 35, March’s down 886 lots to 170,254 and May’s up 273 lots to 42,104. Certified stocks were unchanged at 47,628 bales. (Source: Agfax.com)