By Carolyn Cui

Cotton prices seesawed between gains and losses Friday, after a U.S. government report showed that export sales dropped sharply last week.

Cotton futures for March delivery currently were down 0.1% at 73.73 cents a pound on the ICE Futures U.S. exchange.

On Friday, the U.S. Department of Agriculture reported that net upland sales during the week ended Dec. 29 were down 47% from the previous week at 183,700 running bales. But some traders said the number came out better than expected given the relatively high cotton prices over the week.

U.S. cotton exports have progressed at a rapid pace this season, as a result of a larger domestic crop and the prospect of the upcoming competition from other producers such as Australia. U.S. merchants have already sold 8.9 million bales so far, compared with 5.3 million a year ago.

On the other hand, mills have been buying large quantities of cotton on an "on-call" basis, which allows them to fix prices later at a potentially lower level. Merchants will have to buy back the contracts when prices are fixed, potentially providing a bullish support for prices.

However, cotton prices had a strong start going into 2017, up 4.5% so far. Speculators and index investors entered the small cotton market along with other commodity bets, driving up prices and outstanding positions.

According to the Commodity Futures Trading Commission, there were 11.03 million bales that remain unfixed as of Dec. 30, of which 3.93 million bales are on March--or about 15% of the overall open interest in the futures market. Mills have only around 30 trading days left to fix their March purchases, although some of the contracts will be postponed to May.

"Little did they know that by collectively amassing the second largest on-call position on record, they were running the risk to turn their bearish hopes into a bullish nightmare," wrote Plexus Group, a cotton merchant, in its latest comment.

In other markets, raw sugar for March fell 0.5% to 20.68 cents a pound, cocoa for March was up 0.1% at $2,264 a ton, arabica coffee for March was down 0.3% at $1.4330 a pound, and March frozen concentrated orange juice futures slumped 3.9% to $1.8295 a pound.

Write to Carolyn Cui at

(END) Dow Jones Newswires

January 06, 2017 11:45 ET (16:45 GMT)

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