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          11/26 15:24

   Cotton Finishes at 10-Session High Close 

   Maturing December led advance.  Another round of healthy U.S. weekly export 
sales expected.  Turkish textile industry reported angered by the government's 
antidumping investigation on U.S. cotton imports.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures jumped abruptly from quiet early dealings to triple-digit 
gains Wednesday and settled at a 10-session high close in most-active March. 

   March closed up 72 points at 60.03 cents, in the upper half of its 144-point 
range from down 20 points at 59.11 to up 124 points at 60.55 cents.  It closed 
at its highest finish since Nov. 12. 

   Maturing December led the advance, closing up 175 points to 61.41 cents.  It 
traded to premiums over March as wide as 215 points and closed at a 138-point 
inversion, up 103 points. 

   Volume increased to an estimated 21,100 lots from a final 13,612 lots the 
previous session when spreads accounted for 2,517 lots or 19%, EFS 40 lots and 
EFP 18 lots.  Options volume totaled 2,143 calls and 2,378 puts.

    Talk circulated amid slow liquidation in the December contract that a 
merchant or merchants still might be standing for delivery.  No December 
delivery notices have been issued during the first four sessions of its notice 
period.  The last trading day is Dec. 8.  

   Expectations for another round of healthy U.S. weekly export sales may have 
contributed to the rally.  The USDA report for the week ended Nov. 20 is 
expected to be released at 7:30 a.m. CST on Friday, a day later than usual 
because of the Thanksgiving holiday on Thursday. 

   Business consummated at a three-day sourcing USA cotton summit that ended 
Nov. 14 at Scottsdale, Ariz., is expected to show up in the report.  The 
biennial summit is organized in cooperation with Cotton Council International, 
Cotton Inc. and USDA's Foreign Agricultural Service. 

   Meanwhile, the Turkish government's antidumping investigation on U.S. cotton 
imports has generated "a great disturbance" in the Turkish textile industry, 
says the U.S. agricultural attache' in Ankara. 

   The investigation, launched on Oct. 18, has "caused great confusion in the 
market" and U.S. cotton orders have slowed, the report said, adding that 
importers are worried about a possible temporary import duty. 

   "The local textile industry met the investigation with anger, pointing out 
that domestic production can only meet less than half the sector's needs and 
that the U.S. supplies about half of required imports," the report said. 

   "The Turkish textile industry is preparing to fight against the possible 
antidumping duty, claiming that such a move will make Turkish textile exports 
more expensive and may cause Turkish products to lose market share in 
international markets." 

   The textile industry is one of the crucial industries in Turkey, providing 
about 15% of total exports and about 2.5 million jobs.  U.S. export sales to 
Turkey totaled 1.285 million running bales as of Nov. 13, about 20% of 2014-15 
export commitments. 

   Futures open interest declined 624 lots Tuesday to 172,323, with December's 
down nine lots to 519 and March's down 994 lots to 126,162.  Cert stocks grew 
1,575 bales to 31,351.  Awaiting review were 6,422 bales. 

   World values as measured by the Cotlook A Index gained 50 points Wednesday 
morning to 66.45 cents, leaving the premium to Tuesday's March futures 
settlement unchanged at 7.14 cents. 


(RQ)

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