by Agrimoney.com
Investors may have taken too downbeat view of cotton price prospects from a key report which, citing lower consumption prospects, raised the estimate for world stocks at the close of 2011-12 by nearly 3m bales.
Rabobank cautioned that, while cotton prices were likely to "continue to ease", inventories "remain thin", even after an upgrade to 51.0m bales in the US Department of Agriculture's latest influential Wasde crop report.
The report implied a stocks-to-use ratio - a key measure of a crop's tightness – of 44%, signalling easier supplies than in 2010-11, for which the ratio comes in at 39%, but still making it the third-tightest season since 1994-95.
And even this made some assumptions on world production, pegged at a record 123.2m bales, which some analysts warned may prove too generous.
Big two producers
"We are still cautious about the large Indian and Chinese production forecasts," Goldman Sachs said, besides questioning the USDA's downgraded consumption estimate.
USDA officials forecast Indian harvest – the world's second biggest - rising 10.2% to 27.0m bales, despite concerns within the country over poor rainfall in Gujarat and Maharashtra and Andhra Pradesh, which account for more than 75% of its production of the fibre.
And they stuck by an estimate for production in top-ranked China rising 8.2% to 33.0m bales, despite a downgrade last week to an industry forecast for sowings, seen rising only 5.2%.
Goldman restated estimates of New York's near-term cotton contract standing at 125 cents a pound in both three months' and six months' time, before easing to 100 cents a pound in a year.
Large downgrade ahead?
Australia & New Zealand Bank analysts held out the prospect of a further downgrade to the USDA estimate for America's crop, even after a cut of 1.0m bales, to 16.0m bales, on Tuesday.
The downgrade factored in a higher figure for sowings, offset by crop losses of a record 30% thanks to "historic drought conditions, mainly in Texas", the top cotton-producing state.
ANZ said: "This latest revision to production comes with the USDA still making no change to US cotton yields," which were kept at 800 bales per acre, in line with last year's.
"This now sets the scene for US cotton yields to be revised in August, with a high probability of another large US production downgrade."
New York's best-traded December cotton contract stood 0.9% higher at 105.36 cents a pound at 09:30 GMT.
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