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          10/01 15:28

   Cotton Begins Quarter on Positive Note  

   Cotton Council commends resolution of trade dispute.  Agreement closes a 
matter which had put hundreds of millions of dollars in U.S. exports at risk, 
USTR says.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures began the fourth quarter on a positive note Wednesday, with 
benchmark December finishing above the prior-day high. 

   December closed up 82 points to 62.16 cents, in the upper quarter of its 
118-point range from down 22 points at 61.15 to up 96 points at 62.33 cents.  
This was its largest one-day point gain since Sept. 11. 

   March closed up 54 points to 60.99 cents, trading within an 85-point range 
from 60.20 -- a new contract low -- to 61.05 cents. 

   Volume increased to an estimated 20,600 lots from 17,669 lots the previous 
session when spreads accounted for 5,405 lots or 31%, EFS 358 lots and EFP 60 
lots.  Options volume totaled 4,650 calls and 10,550 puts. 

   The National Cotton Council appreciates the U.S. government's successful 
efforts to conclude the U.S.-Brazil trade dispute in the World Trade 
Organization through negotiation, avoiding retaliation, the industrywide NCC 
said in a news release. 

   Council Chairman Wally Darneille of Lubbock reiterated that the U.S. cotton 
industry has undertaken extensive efforts to resolve the case.  He said the NCC 
offered comprehensive reform of cotton policy as part of the new farm law. 

   "The new U.S. farm bill includes several necessary changes to cotton policy 
and the GSM export credit program," he said.  "When compared to previous 
programs, cotton policy is more market-oriented with the primary safety net 
conveyed through insurance products that must be purchased by the producer. 

   "Officials from the Office of the U.S. Trade Representative and the 
Department of Agriculture are to be commended for reaching a comprehensive 
agreement that brings the dispute to a close," Darneille said.  "With the 
conclusion of the case, the U.S. cotton industry can bring a renewed focus to 
the challenges that lay in front of us." 

   Trade Ambassador Michael Froman, Secretary of Agriculture Tom Vilsack and 
their Brazilian counterparts signed the agreement in Washington Wednesday.  
Under the agreement, the United States will make a final one-time payment of 
$300 million to Brazil and Brazil will drop the cotton case so long as the 
current farm bill is in effect. 

   In a USTR news release, Froman said the agreement "brings to a close a 
matter which put hundreds of millions of dollars in U.S. exports at risk.  The 
United States and Brazil look forward to building on this significant progress 
in our bilateral economic relationship." 

   "Without this agreement, American businesses, including agricultural 
businesses and producers, could have faced countermeasures in the way of 
increased tariffs totaling hundreds of millions of dollars every year," Vilsack 
said.  "This removes that threat and ensures American cotton farmers will have 
effective risk management tools." 

   Meanwhile, some estimates on U.S. upland export sales for shipment this 
season during the week ended Sept. 25 have ranged on either side of the prior 
week's 155,700 running bales.  The USDA will release the report at 7:30 a.m. 
CDT on Thursday. 

   Futures open interest declined 671 lots Tuesday to 182,378, with December's 
down 878 lots to 100,693 and March's up 71 lots to 61,575.  Certificated stocks 
declined 118 bales to 18,428. 

   World values as measured by the Cotlook A Index dropped 30 points to 69.65 
cents Wednesday morning after falling below 70 cents the prior day for the 
first time since November 2009.  The premium to Tuesday's December futures 
settlement narrowed 20 points to 8.28 cents. 


(RQ)

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