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DTN Cotton Close: Settles on Mostly Slight Gains

Ernst Undesser
By Duane Howell DTN Cotton Correspondent April 19, 2017

DTN Cotton Close: Settles on Mostly Slight Gains

©Debra L Ferguson Stock Images

Traders awaited the U.S. weekly export sales report. A slight to moderate slowing of sales likely won’t be surprising, but talk already has circulated that another hike in the export forecast might be ahead.

Cotton futures finished another day of choppy price action on slight gains beyond soon-to-mature May Wednesday as traders awaited the U.S. weekly export sales report.

Most-active July closed up 16 points to 78.32 cents, smack in the middle of its 132-point from up 82 points at 78.98 cents to down 50 points at 77.66 cents. It hit an 11-session high, held on the downswing above the prior-day low and bounced to a new high close since March 31.

May, where first notice day is Monday, led the gains, closing up 85 points to 77.67 cents, just off the high of its 117-point range from 76.58 to 77.75 cents. December edged up five points to close at 74.46 cents, trading within an 81-point range from 74.82 to 74.01 cents.

Volume slowed to an estimated 36,008 lots from 48,574 lots the prior session when spreads accounted for 34,141 lots or 70%, EFS 594 lots and EFP 93 lots. Options volume increased to 5,922 lots (3,606 calls and 2,316 puts) from 3,459 lots (1,311 calls and 2,148 puts).

A slight to moderate slowing in U.S. upland export sales from the prior week’s 307,200 running bales probably wouldn’t be surprising in USDA’s weekly report on Thursday.

However, with cumulative 2016-17 export sales already at 99% of USDA’s April forecast, which was up 800,000 statistical bales from the March estimate, talk has circulated that another hike might be seen in the May 10 supply-demand report. Shipments have reached 68% of the estimate and are up 74% from a year ago.

Sales have averaged 307,400 RB the last four weeks and shipments have averaged 414,800 RB, well above the pace needed to match the forecast.

Demand for the U.S. fiber crop this season has been broad-based among numerous countries as the need for high quality cotton has risen, USDA reports have shown.

Based on the latest USDA estimates, U.S. share of global cotton trade is expected to reach nearly 39%, well above last season’s 26% and the highest in six years when it reached 41%. Global trade is projected up 2% from last season and the largest in three years.

Cotton import demand has varied. Imports are projected larger for Vietnam and India, smaller for Turkey and Pakistan and flat for Bangladesh. For China, the third largest importer behind Bangladesh and Vietnam, imports are forecast similar to last season as policies are in place to hold them near China’s World Trade Organization commitment level.

As of April 6, the top five importers of U.S. cotton this season were Vietnam, 2.365 million bales; China, 2.125 million; Turkey, 1.637 million; Indonesia, 1.23 million and Mexico, 1.074 million.

With the surge in U.S. exports, declines are expected in the shipments of most major cotton exporting countries. The exception is Australia where shipments are expected to rise to 3.9 million bales, largely because a crop rebound provided additional exportable supplies.

Exports are forecast lower for India, Brazil and Uzbekistan at 4 million bales, 2.9 million and 1.5 million, respectively.

Futures open interest declined 2,499 lots Tuesday to 239,278, with May’s down 13,256 lots to 11,089, July’s up 9,185 lots to 125,997 and December’s up 1,198 lots to 90,182.

Certified stocks grew 3,250 bales to 298,686, the first increase since April 10 and down from the 2017 peak of 329,622 bales on April 7. Awaiting review were 2,206 bales at Galveston.

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Ernst Undesser
By Duane Howell DTN Cotton Correspondent April 19, 2017