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DTN Cotton Close: Edges Higher in Most Contracts

Ernst Undesser
By Duane Howell DTN Cotton Correspondent August 11, 2017

DTN Cotton Close: Edges Higher in Most Contracts

Texas A&M AgriLife Extension Service photo by Kathleen Phillips

Skepticism that the U.S. crop can reach the 20.5 million bales off a record yield as estimated by USDA offered support. Mills added 2,073 lots to their unpriced position.

 

 

Cotton futures edged slightly higher in most contracts Friday, regaining a little ground from heavy losses generated by USDA’s bearish estimates on Thursday.

December closed up 14 points to 68.25 cents, in the lower third of its 140-point range from down 36 points at 67.75 to up 104 points at 69.15 cents. It lost 237 points for the week and settled at its lowest weekly finish since July 14 when it closed at 66.58 cents.

March settled up 22 points to 68.05 cents, trading within a 134-point range from 67.53 to 68.87 cents and posting a weekly loss of 200 points. October, the only loser, closed down two ticks at 69.24 cents.

Volume slowed to an estimated 29,512 lots from 44,429 lots the prior session when spreads accounted for 14,696 lots or 33% and EFP 596 lots. Options volume totaled 4,323 lots — 2,321 calls and 1,992 puts.

Skepticism that the U.S. crop could reach the 20.545 million bales off a record average yield of 892 pounds per harvested acre, as estimated by USDA on Thursday, offered support.

With so much of the growing season still ahead and some late-developing cotton in top-producing Texas, the U.S. crop estimate could turn out to be the highest that will be seen all year, some industry people asserted.

The USDA estimate is for the largest U.S. crop since 2006 when production totaled 21.587 million bales and yields averaged 814 pounds. The projected 2017 yield would surpass the record of 887 pounds in 2012.

An all-time high of 8.8 million bales is projected for Texas, topping the record of 8.44 million bales set in 2005. Only two other Texas crops in history have exceeded 8 million bales — 8.1 million in 2016 and 8.25 million in 2007.

The U.S. all-cotton production forecast includes 19.775 million bales of upland, up from last season’s 16.601 million, and 770,000 bales of Pima or extra-long staple cotton, up from 569,000 bales in 2016.

By regions, upland production is estimated at 5.24 million bales in the Southeast, up from 3.775 million last season; 4 million bales in the Midsouth, up from 3.33 million in 2016; 9.63 million in the Southwest, up from 8.788 million; and 905,000 bales in the West, up from 708,000.

Meanwhile, mills added a total of 2,073 lots to lift their total unpriced on-call position to 111,928 lots (11.193 million bales) 1ast week, according to figures reported by the Commodity Futures Trading Commission after the close Thursday.

Producers priced 257 lots to trim their unfixed position to 38,029 lots. The net call difference thus widened 2,330 lots to 73,899, 34% of the open interest. A year ago, unpriced lots were 74,149 for mills and 23,462 for producers, with the net call difference of 50,687 lots representing 20.4% of the open interest.

Mills have increased their unfixed position six consecutive weeks, adding 27,030 lots, while producers have priced 285 lots and added 2,630 lots for a net increase of 2,345 lots.

Futures open interest edged up 41 lots to 221,587 on Thursday, with December’s down 562 lots to 151,173 and March’s up 84 lots to 49,240. Certified stocks dropped 93 bales to 19,430, lowest since April 2015.

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Ernst Undesser
By Duane Howell DTN Cotton Correspondent August 11, 2017