ICE cotton surged in record-high volume on Wednesday, hitting a two-week high and reaching its daily price limit after the US government slashed its forecast for US and global production and ending stocks significantly more than expected. December cotton on ICE Futures US settled up by 2.87 cents, a 4.6 percent gain, at 64.69 cents per pound, the largest single-session gain ever for the December 2015 contract and the largest single-day gain for the second-month contract since June 2012.
The contract rose by the daily limit of 3 cents a lb above the prior session's settlement, rising as high as 64.82 cents a lb, or 4.9 percent. That was the contract's highest level since July 28. Earlier in the session, it had fallen 1 percent to a new contract low at 61.20 cents a lb. Nearly 48,000 lots traded hands in the December contract, the heaviest trading day for the second-month contract on record.
The US Department of Agriculture, in its monthly supply and demand report, reduced its forecast for US ending stocks by the end of July 2016 to 3.1 million 480-lb bales and slashed its US production estimate by 10 percent to 13.08 million bales. Traders said these levels were well below expectations. "It's a huge drop," said Nick Gentile, managing partner at NickJen Capital in New York. "I don't think anyone expected these numbers." The USDA cited information from its first production field survey, which suggested "lower planted area, higher abandonment, and a lower average yield" on US cotton fields. The production and ending stocks figures were the lowest since the 2013/14 crop year, when a drought ravaged Texas' crop. This time, too much rain may have limited plantings.
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