Cotton futures closed at their lowest in nearly two years on Monday as the U.S. Department of Agriculture projected record world cotton supplies for the 2012/13 marketing year (August/July). The USDA forecast cotton ending stocks at a record 73.75 million (480 lb) bales, up over 10% from 66.88 million bales for the previous season.
The new-crop December cotton contract fell 1.78% to a session low of 75.98 cents per lb, down 1.35 cents. According to Thomson Reuters data, it was the lowest close for the contract since December 2010.
July cotton on the ICE Futures U.S. exchange was up by .34 cents to finish at 79.16 cents per lb, nearly the lowest close for the spot contract since July 2010. The session high came in at 80.65 cents.
The USDA’s estimate of market conditions said American farmers will see lower prices in the upcoming 2012/13 season. According to the report, the forecast range for the average price received by producers is 65 to 85 cents per pound, compared with 91 cents estimated for 2011/12.
US cotton yields are estimated at 777 lbs per acre, compared with 790 lbs in 2011/12 and 812 lbs in 2010/11. Of the 73.75 million estimated bales, the world’s top producer China will account for 28.05 million–nearly 40% of total world cotton stocks. The USDA predicts Chinese cotton imports will drop to 14 million bales for the same season, down a third from 21.5 million in 2011/12.
Since peaking at a record $2.27 per pound in March 2011, cotton prices have plunged by nearly two-thirds as the market struggles with increased output and a global recession that has devastated market demand.