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          03/27 14:40

   Cotton Finishes Above Prior-Day High

   Analysts estimated U.S. cotton plantings at an average of 9.44 million 
acres, down from 11.04 million acres seeded last year.  Upland cotton under 
loan declined to 764,617 bales.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures bounced to close ahead for the day and week on light volume 
Friday amid weakness in both the U.S. dollar index and crude oil.

   Spot May closed up 47 points to 63.55 cents, in the upper half of its 
114-point range from 62.80 to 63.94 cents.  It snapped a string of three 
straight lower closes and finished above the prior-session high.

   July settled up 37 points to 63.87 cents and December gained 35 points to 
64.68 cents.  For the week, the market rose by 73 points in May, 47 points in 
July and 62 points in December.

   Volume slowed to an estimated 14,800 lots from 18,919 lots the previous 
session when spreads accounted for 9,463 lots or 50% and EFP 344 lots.  Options 
volume totaled 981 calls and 2,103 puts.

   Analysts estimated U.S. cotton plantings at an average of 9.44 million 
acres, according to a survey by The Wall Street Journal, down 14.5% from last 
year's 11.04 million acres.

   That would be the smallest area since 2009 when growers planted cotton on 
9.15 million acres.  Estimates in the journal survey ranged from 9 million to 
9.6 million acres.

   The USDA will report on its prospective plantings surveys at 11 a.m. CDT on 
Tuesday.  It conducted the surveys from Feb. 27 to March 18.

   In its early 2015 estimates last month, USDA projected plantings at 9.7 
million acres and the harvested area at 8.4 million acres.  The projected 
harvested area was based on regional abandonment rates near their long-run 
averages.

   As a result, the 13% abandonment ranked slightly above that of 2014 but well 
below the 2011-13 seasons.  With the Southwest expected to account for 60% of 
the cotton area in 2015, USDA analysts said, weather conditions in that area 
will have considerable impact on the crop.

   Improved subsoil moisture in the important Texas High Plains, which planted 
36% of the U.S. upland area last year, could have a positive impact on the 
abandonment outlook.

   But aside from moisture, considered the largest single yield-limiting factor 
in this semi-arid area, such elements as sweeping hailstorms and blowing sand 
also of course can impact abandonment.

   Meanwhile, U.S. 2014-crop upland outstanding loans declined 23,336 running 
bales to 764,617 during the week ended Monday, according to the latest USDA 
figures.  Repayments were made on 35,439 bales and entries were 12,103 bales.

   Upland cotton under loan included 199,596 bales of Form A issued to 
individual growers and 565,021 bales of Form G issued to marketing cooperatives 
or loan servicing agents.

   Futures open interest dropped 971 lots Thursday to 182,601, with May's down 
1,660 lots to 95,507, July's up 308 lots to 44,276 and December's up 349 lots 
to 37,373.  Cert stocks grew 644 bales to 9,771.  Awaiting review were 649 
bales.

   World values as measured by the Cotlook A Index edged up 10 points Friday 
morning to 69.85 cents, narrowing the premium to Thursday's May futures 
settlement by two points to 6.77 cents.  For the week, the index gained 70 
points. 


(RQ)

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