Friday, May 16, 2014

DTN Cotton Close: Extends Losing Streak to Six Sessions

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July finished at its lowest close since March 5. Mills priced a modest 168 on-call lots of old-crop cotton and added 840 lots in December in the latest CFTC reporting week.

Cotton futures extended a losing streak to six sessions in a row Friday, finishing at the lowest close in spot July since March 5.

July settled down 54 points to 89.82 cents, just off the low of its 108-point range from up 48 points at 90.84 to down 60 points at 89.76 cents. It slipped through longstanding chart support around 90 cents to near another support point at 89.71, the low of March 24.

December closed off 28 points to 82.34 cents, trading from up 18 points at 82.80 to down 44 points at 82.18. It posted its lowest intraday price since April 25 and lowest close since April 21.



For the week, the market shed 254 points in July and 137 points in December. The inverted July-December spread lost 117 points, closing at a 748-point premium on July. The close matched the low seasonal settlement on Tuesday when it traded down to 708 points, lowest since January.

Volume slowed to an estimated 12,200 lots from 16,312 lots the previous session when spreads totaled 4,199 lots or 26% and EFP 42 lots. Options volume totaled 2,085 calls and 4,070 puts.

Mills priced a modest 168 on-call lots of old-crop cotton during the week ended last Friday to trim their unfixed July position to 30,345 lots, according to the latest Commodity Futures Trading Commission call report.

Producers priced 543 lots to shave their small unfixed position to 1,456 lots. The net call difference widened 375 lots to 28,889 (2.889 million bales), which was 24.07% of July’s declining open interest, against 23.48% a week earlier.

The unfixed mill position in July outweighed that of producers by a ratio of 20.84:1, up from 15.26:1 the prior week. Mill fixations are expected to quicken ahead of first notice day for July deliveries on June 24. Scale-down mill pricing this week may have slowed the July descent.

Producers priced 789 lots in December during a reporting week in which the new-crop contract posted two new seasonal intraday highs, reaching up to 84.74 cents on May 8. This reduced their unfixed December position to 18,401 lots.

Mills added 840 December lots to hike their unfixed position there to 12,872 lots. The net call difference held by producers narrowed by 1,629 lots to 5,529, which totaled 8.32% of December’s rising open interest, down from 11.77%.

Meanwhile, repayments reduced U.S. outstanding loans on upland cotton by 123,242 running bales during the week ended May 12, according to the latest USDA figures.

Upland loans outstanding declined to 898,866 bales, including 65,211 bales of Form A issued to individual growers and 833,655 bales of Form G issued to marketing cooperatives or loan servicing agents.

Futures open interest declined 1,420 lots Thursday to 191,108, with July’s down 1,930 lots to 114,395 and December’s up 330 lots to 68,321. Certificated stocks grew 4,031 bales to 405,712. There were 5,196 newly certified bales, 1,165 bales decertified and 4,963 bales awaiting review.

World values as measured by the Cotlook A Index dropped 15 points Friday morning to 92.55 cents. The premium to Thursday’s July futures settlement widened 19 points to 2.19 cents.

Forward A Index values for 2014-15 slipped 25 points to 90.05 cents, widening the discount to the 2013-14 index by 10 points to 2.50 cents and the premium to Thursday’s December futures close by a point to 7.43 cents.

For the week, the index for 2013-14 lost 175 points and the new-crop index fell 65 points.

DTN Closing Cotton Commentary          07/25 15:00

   Cotton Settles on New Contract Low Close 

   Forward quotes indicate a new-crop AWP would be within around a couple of 
cents of the base loan rate.  Light on-call activity reported in December.  
U.S. upland cotton under loan fell to 213,969 bales. 

By Duane Howell
DTN Cotton Correspondent

   Cotton futures fell to a new contract low and low close in benchmark 
December for the second straight session Friday, extending a weekly losing 
streak to seven in a row.

   December closed off 70 points to 65.35 cents, below the midpoint of its 
192-point range from up 40 points at 66.45 to down 152 points at 64.53 cents.  
It lost 239 points for the week.

   Spot October shed 124 points to close at 65.16 cents, settling at a discount 
to December for the first time since July 8, and March finished down 95 points 
to 66.03 cents.

   Volume slowed to an estimated 21,600 lots from 28,373 lots the previous 
session when spreads accounted for 5,439 lots or 19% and EFP 291 lots.  Options 
volume totaled 6,515 calls and 5,521 puts.

   With prices already having fallen to or below the cost of production, 
unofficial calculations indicate a new-crop adjusted world price (AWP) would be 
within around a couple of cents of the base U.S. loan rate.

   The average of the five lowest-priced world growths quoted for forward 
shipment for the Far East dipped 20 points to 74.18 cents during the week ended 
Thursday, according to USDA.

   Applying the transportation and quality differential of 19.84 cents for 
2013-14 cotton to that 2014-15 average would translate into an estimated 
new-crop AWP of 54.34 cents, against the base government loan rate of 52 cents.

   Officially, USDA announced the AWP for the program week ahead at 61.78 
cents, down from 62.06 cents this week.  The low-quote world growth average 
dipped 28 points to 81.62 cents and the lowest U.S. quote landed in the Far 
East slipped 20 points to 86.10 cents.

   Meanwhile, mills priced a light 91 on-call lots in December last week to 
shave their unpriced position there to 13,869 lots, according to the latest 
call data from the Commodity Futures Trading Commission.

   Producers priced a modest 259 December lots to trim their unfixed position 
to 22,427 lots.  The net call difference declined 168 lots to 8,558, which was 
7.13% of December's rising open interest.

   Mills added a total of 2,240 lots in March, May and July, boosting their 
open holdings in those three contracts to 28,885 lots, while producers were 
inactive in those 2014-15 deliveries beyond December.

   In the 2014-15 contracts as a group, unpriced holdings rose by 2,149 lots on 
the mill side to 42,754 and declined 259 lots on the producer side to 24,555.  
This widened the net call difference by 2,408 lots to 18,199, 12.2% of the 
growing open interest.

   In other happenings, repayments on 33,935 bales during the week ended July 
21 reduced U.S. outstanding loans on upland cotton to 213,969 bales, according 
to the latest USDA figures.

   Upland cotton under loan included 28,677 bales of Form A issued to 
individual growers and 185,292 bales of Form G issued to marketing cooperatives 
or loan servicing agents.

   Futures open interest expanded 3,049 lots Thursday to 157,018, with 
December's up 1,289 lots to 121,909 and March's up 1,255 lots to 27,241.  
Certificated stocks declined 6,358 bales to 176,373.

   World values as measured by the Cotlook A Index fell 200 points Friday 
morning to 81.15 cents.  The premium to Thursday's October futures close 
widened 37 points to 14.75 cents.

   Forward A Index values for 2014-15 dropped 135 points to 74.45 cents, 
narrowing the discount to the 2013-14 index by 65 points to 6.70 cents and 
widening the premium to Thursday's December settlement by 68 points to 8.40 
cents. 


(RQ)

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