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          01/30 14:42

   Cotton Finishes Slightly Lower at Midrange

   March lost 1.5% for the month. Mill on-call fixations reduced their unpriced 
position in March below that of producers. Marketing loan gain pegged at crop 
year high. Upland cotton under loan rose by 67,436 bales.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures again traded within tight bands and finished with slight 
losses Friday, snapping a string of four consecutive higher closes. 

   Spot March settled down 21 points to 59.36 cents, in the middle of its 
63-point range from down 52 points at 59.05 cents to up 11 points at 59.68 
cents. It gained 206 points or 3.6% for the week but still lost 91 points or 
1.5% for the month. 

   May closed down 33 points to 60.02 cents, July fell 44 points to 60.85 cents 
and December slipped 34 points to 62.79 cents.

   Volume slowed to an estimated 26,400 lots from 33,856 lots the previous 
session when spreads accounted for 18,075 lots or 53% and EFP 133 lots.  
Options volume totaled 3,835 calls and 3,221 puts. 

   Mills priced 3,997 on-call lots and producers 426 lots in March last week, 
according to the latest data reported by the Commodity Futures Trading 
Commission. This reduced the unfixed March call positions to 8,094 lots on the 
mill side and 9,314 lots on the producer side. 

   Producers thus came into this week with their unpriced holdings exceeding 
those of mills by 1,220 lots, while a week earlier the unfixed mill position 
had topped that of producers by 2,351 lots. 

   This marked the first time in some years that mills have had less to price 
in March than producers by the third week of January, a veteran cotton 
specialist said. 

   Sharon Johnson, senior cotton specialist with Wedbush Securities at Roswell, 
Ga., said the 7,488 lots priced by mills in March the last two reporting weeks 
is an unusually large number in that time frame. 

   This reflects the "very low cotton price" and the approaching first notice 
day for March deliveries on Feb. 23, she said. 

   The net call difference as of Jan. 23 represented 1.15% of March's open 
interest, which expanded 7,682 lots last week but had declined by 10,318 lots 
from last Friday coming into this Friday's session. 

   The unfixed producer March position outweighed that of mills by a ratio of 
1.15:1 as of last Friday, while a week earlier the unpriced mill holdings had 
exceeded those of producers by 1.24:1. 

   On the competitive-pricing front, the average of the lowest-priced world 
growths for the Far East fell 60 points to 64.68 cents during the week ended 
Thursday, according to USDA, while the lowest-quoted U.S. growth landed there 
dropped 10 points to 68.25 cents. 

   The U.S. premium thus widened 50 points to 3.57 cents. The adjusted world 
price for the program week that began Friday is 44.99 cents, down from this 
week's 45.59 cents, USDA announced.

   This results in a marketing loan gain or loan deficiency payment of 7.01 
cents, a crop year high and up from 6.41 cents. The fine count adjustment is 
0.30 of a cent for 2014-crop qualities better than 31-3-35. 

   Separately, U.S. outstanding loans on 2014-crop upland cotton rose by 67,436 
running bales to 2.919 million during the week ended Monday, the latest USDA 
figures showed. Entries were 170,707 bales and repayments were made on 103,271 
bales. 

   Upland cotton under loan included 403,790 bales of Form A issued to 
individual growers and 2,514,717 bales of Form G issued to marketing 
cooperatives or loan servicing agents. 

   Futures open interest fell 1,468 lots Thursday to 214,775, with March's down 
4,690 lots to 124,561 and May's up 1,326 lots to 48,716. Cert stocks grew 1,847 
bales to 60,527 bales. Awaiting review were 5,541 bales. 

   The Cotlook A Index of world values was steady Friday at 67.30 cents, 
narrowing the premium to Thursday's March futures settlement by 13 points to 
7.73 cents.   


(RQ)

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