Cotton futures recovered some ground despite an apparent double blow from a, fourth, downgrade by the International Cotton Advisory Committee to its price forecast, and an upbeat outlook by Informa Economics for US harvest prospects.
Informa Economics pegged the US harvest, whose fortunes are particularly important for New York futures, at 13.7m bales, some 810,000 bales more than the US Department of Agriculture forecast.
The estimate reflected higher yield expectations, which many commentators see improving after Tropical Storm Karen left US crops largely unscathed - a factor which sent New York futures tumbling earlier this week.
The forecasts - in a shadow report to the USDA's key Wasde briefing, which was postponed from today by the US government shutdown – also placed US end-2013-14 stocks 810,000 bales above the USDA figure.
Price downgrade - again
The estimates came hours after the International Cotton Advisory Committee, an intergovernmental group, cut its forecasts for cotton prices in 2013-14 for a fourth time, this time to 90 cents a pound.
That is well below the 118 cents a pound that the ICAC had initially foreseen for prices, as measured by the Cotlook A index of physical values, and barely above the 88 cents a pound achieved last season.
The downgrade reflected improved expectations for world stocks, which the committee forecast ending 2013-14 at 20.3m tonnes (93.2m bales), up 1.1m tonnes on its previous forecast.
The estimate for consumption this season was trimmed, while figures for harvests both last season and in 2011-12 were upgraded.
Chinese imports
Nonetheless, the report held out some consolation for cotton bulls, with the ICAC pegging Chinese imports this season at 3.18m tonnes (14.6m bales), well above the USDA forecast of 11.0m bales.
Rabobank has pegged the figure at 7m bales, a slump of 66%.
China's cotton import demand has been a key support to prices, and is seen as a reflection of how significantly a domestic farmer support programme, which has prompted a huge build-up in the country's inventories, is keeping domestic values above those in the international market.
China, the top cotton producer, consumer and importer, had bought just over 100,000 tonnes (459,000 bales) of the fibre so far this season for its stockpiles, as of the end of September, the ICAC said.
'Bit of a relief rally'
Furthermore, the improved hopes for a US budget deal have boosted sentiment in a market for an agricultural commodity which, as an industrial raw material, is more sensitive to economic thinking than food crops.
Luke Mathews, at Commonwealth Bank of Australia, flagged that the potential US accord had "provided support to the complex".
A London trader told Agrimoney.com: "There is a bit of a relief rally going on.
"The tos and fros in Washington are more important for cotton than for some other markets, although it is not obvious that the rally will last too long, if the US crop has indeed improved."
Cotton for December stood 0.9% higher at 83.95 cents a pound in New York at 07:00 local time (12:00 UK time).
Nonetheless, they remain nearly 4% down this week, after investors removed risk premium injected in the run up to Tropical Storm Karen.
