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          04/24 14:52

   Cotton Nears Multi-Month April High 

   Ogallala groundwater levels declined an average of 0.56 of a foot from 2014 
to 2015 in the 16-county Texas High Plains water district. Mills priced 3,740 
on-call lots and producers 1,293 lots in May last week.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures climbed to the highest finish in most-active July Friday 
since its rally high on April 8. 

   July settled up 89 points to 66.34 cents, in the upper quarter of its 
139-point range from down 25 points at 65.20 to up 114 points at 66.59 cents. 
At the high, July was up 609 points or 10.07% from its March 18 low and was 
within 11 ticks of the April peak of 66.70 cents. 

   Maturing May advanced 191 points to close at 66.50 cents, recapturing a 
premium over July, and December rose 48 points to finish at 65.62 cents. 

   For the week, the market gained 321 points in May, 305 points in July and 
198 points in December. 

   Volume slowed to an estimated 25,600 lots from a final whopping 50,005 lots 
the previous session when spreads accounted for 13,503 lots or 27% and EFP 789 
lots. 

   Groundwater levels in the Ogallala Aquifer dropped an average of 0.56 of a 
foot from 2014 to 2015 within the 16-county area of the Texas High Plains 
Underground Water Conservation District, data showed this week. 

   The decline is 0.76 of a foot less than the drop of 1.32 feet recorded in 
2013-14 drought conditions, the Lubbock-based district reported in a news 
release. 

   The 10-year average change from 2005-15 showed a drop of 10.27 feet, the 
district said, and the five-year 2010-15 average was minus 5.69 feet. 

   Annual water level measurements are made from December to March in 1,418 
privately owned wells in the district's observation well network. The winter 
measurements allow time for water levels to stabilize following the prior 
season's pumping. 

   Jason Coleman, the district's general manager, said the observation well 
program is being supplemented with a network for wells completed in the Dockum 
Aquifer. 

   Although not in the current data, the Dockum information is expected to be 
available in the near future on the district website, he said. 

   Meanwhile, unpriced on-call positions in old-crop contracts declined 2,837 
lots on the mill side to 22,267 and 736 lots to 6,397 on the producer side last 
week, according to the latest data from the Commodity Futures Trading 
Commission. 

   The May-July net call difference declined 2,137 lots to 15,870, which was 
14.18% of the open interest. The unfixed mill position outweighed that of 
producers by a ratio of 3.54:1. At the corresponding point a year ago, the net 
old-crop difference was 32,985 lots. 

   In May, mills priced 3,704 lots and producers fixed 1,293 lots, reducing 
their unfixed positions to 3,293 and 1,542 lots, respectively, with four 
trading sessions then remaining ahead of first notice day. 

   Mills added 209 lots in December to hike their unpriced position there to 
17,092 lots and producers priced 77 lots to nudge theirs down to 10,928 lots. 

   Futures open interest expanded 3,246 lots Thursday to 171,327, with May's 
down 929 lots to 543, July's up 3,008 to 109,620 and December's up 912 lots to 
53,252.  Cert stocks grew 1,933 bales to 72,131. Awaiting review were 3,199 
bales. 

   World prices as measured by the Cotlook A Index jumped 240 points Friday 
morning to 72.15 cents, narrowing the premium to Thursday's July futures 
settlement by 13 points to 6.70 cents. The index was up 100 points for the 
week. 


(BAS)

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