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          10/24 15:05

   Cotton Jumps Ahead as Volume Improves 

   U.S. all-cotton ginning totaled 2.1 million running bales as of Oct. 15 and 
upland classing as of Thursday reached 2.8 million RB. India expected to 
procure 3.9 million 480-pound bales under its minimum support price program. 
Exports projected at 6 million bales.  

By Duane Howell
DTN Cotton Correspondent

   Cotton futures finished above highs of the previous four sessions in spot 
December Friday after jumping from a shallow overnight dip to a triple-digit 
intraday gain. 

   December settled up 77 cents at 63.81 cents, in the upper half of its 
193-point range from down 31 points at 62.73 to up 162 points at 64.66 cents. 
This marked its highest close and intraday price since Oct. 14. 

   Sluggish grower selling has kept near-term supply availability tight even as 
the harvest has gained momentum in wide areas of the Cotton Belt, analysts 
said. Scale-down mill buying offered support as prices rallied from a 
14-session low at 61.98 cents on Thursday, within a few ticks of the 62.02-cent 
low on the first day of the marketing year on Aug. 1. 

   March closed up a modest 29 points to 62.17 cents, in the lower third of its 
113-point range from 61.86 to 62.99 cents. For the week, December gained 81 
points and March rose 44 points. 

   Volume quickened from a slow start to an estimated 22,900 lots, up from 
17,480 lots the previous session when spreads accounted for 5,284 lots or 30% 
and EFP 105 lots. Options volume totaled 2,327 calls and 3,452 puts. 

   On the U.S. crop scene, all-cotton ginning totaled 2,107,800 running bales 
as of Oct. 15, USDA said, up from 1,100,750 bales a year ago but down from 
2,942,600 bales two years ago and 3,467,450 bales in 2011. Gins had processed 
13% of the 2014-15 crop estimated on the basis conditions around Oct. 1 and 
converted to running bales from statistical bales. 

   Classing offices graded 840,772 running bales of upland cotton during the 
week ended Thursday to boost the total for the season to 2,806,464 bales, up 
from 1,559,225 bales a year ago. 

   Cotton tenderable on futures contracts totaled 73.6% for the week and 74.5% 
for the season, compared with 75.1% and 74.8%, respectively, the previous week. 
About 18% of the estimated upland crop had been classed. 

   On the international scene, weak prices have prompted the Cotton Corp. of 
India to begin procuring cotton under the minimum support price program, says a 
report from the U.S. agricultural attache' in Mumbai. 

   Trade sources forecast that around 5 million 170-kilogram bales (3.9 million 
480-pound bales) could be procured, the report said. 

   The post forecast exports at 6 million 480-pound bales, up from USDA's 
projection earlier this month of 5 million. Export shipments for 2013-14 
reached 9.2 million bales, the report said, which is down from USDA's estimate 
of 9.4 million bales. 

   "Although export shipments since August have been relatively slow with lower 
Chinese buying, Bangladesh and Pakistan emerged as top destinations," the 
report said. 

   The post's import forecast is unchanged from the USDA estimate of 800,000 

   Official statistics reveal the planted area for 2014-15 reached a record 
12.7 million hectares (31.39 million acres), the post said, estimating 
production at 30.8 million bales. 

   The USDA forecast India's crop, the world's largest, at 31 million bales, 
same as in 2013-14, with a record area for harvest moderated by lower yields. 
It estimated India's area at 12.75 million hectares (31.51 million acres), up 
9% from 2013-14, and projected the yield down 8% from last season's record to 
529 kilograms per hectare (472 pounds per acre). 

   The post projected India's consumption at 23.5 million bales, down from 
USDA's 24.5 million. Monthly consumption in August was 1.8 million bales, the 
report said, but added that trade sources indicated that mill buying from 
September onward has remained weak because of poor demand for raw cotton and 
cotton yarn, affecting ex-gin margins. 

   Trade sources indicated that textile mills have built up considerable 
inventories and are limiting buying of raw cotton in anticipation of declining 
prices, the report said. 

   Futures open interest increased 642 lots Thursday to 190,927, with 
December's up 203 lots to 94,435 and March's up 159 lots to 69,601. Cert stocks 
remained at 15,928 bales. 

   World prices as measured by the Cotlook A Index dipped 5 points Friday 
morning to 69.80 cents. Premiums to Thursday's futures settlements widened 41 
points to 6.76 cents over March and narrowed a point to 7.92 cents over March. 
For the week, the index dropped 40 points. 


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