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DTN Cotton Close: Finishes Inside Day Lower on Light Volume

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

DTN Cotton Close: Finishes Inside Day Lower on Light Volume

©Debra L Ferguson Stock Photography

Traders warily eyed track of Hurricane Maria. Cotton crop conditions in Georgia tumbled following Hurricane Irma. Improvements in Texas and elsewhere partially offset declines in Georgia and South Carolina.

Cotton futures finished a lightly traded session lower on inside-range price action Tuesday.

December settled down 23 points at 69.27 cents, just below the middle of its 106-point range between down 69 points at 68.81 and up 37 points at 69.87 cents. It closed right back below its 50-day moving average.

March lost 60 points to finish at 68.30 cents, in the lower quarter of its 94-point range between 68.10 and 69.04 cents. October, where first notice day is Monday, settled down 43 points to 69.98 cents.

Traders were keeping a wary eye on the track of Hurricane Maria, a giant Category 5 storm expected to move near or over Puerto Rico and the Virgin Islands Tuesday night and Wednesday.

Volume slowed to an estimated 16,786 lots from 23,177 lots the previous session when spreads accounted for 6,540 lots or 28%, EFS 1,073 lots and EFP 73 lots. Options volume slipped to 2,916 lots (943 calls and 1,973 puts) from 5,413 lots (2,266 calls and 3,147 puts).

Good to excellent cotton in Georgia, the nation’s second largest cotton-producing state, fell 26 percentage points to 43% during the week ended Sunday, according to USDA’s latest weekly crop progress report.

Cotton rated poor to very poor jumped 23 points to 31%. Improvements in Texas, North Carolina and elsewhere partially offset declines in Georgia and South Carolina.

Conditions also improved in Arizona, Kansas, Mississippi, Missouri, Oklahoma, Tennessee Texas and Virginia, while ratings were about steady in Alabama, Arkansas, California and Louisiana.

Overall, U.S. good-excellent cotton dipped two points to 61% and the DTN cotton condition index, based on the USDA report, fell 10 points to 144, still up from 48% and 121 a year ago, respectively.

The Georgia crop took the brunt of cotton damage from Hurricane Irma, which made landfall in the Florida Keys early on Sept. 10 as a Category 4 storm and a second continental landfall in South Florida. Irma weakened to a tropical storm by Sept. 11 and tracked north-north westward across North Florida and Southwest Georgia.

Despite weakening, Irma maintained tropical storm force winds extending up to 400 miles from the center of the storm. Irma’s slow movement and sheer size made for hours of tropical storm force winds of around 40 to 60 mph, USDA said.

Widespread wind damage and power outages were reported in Florida, Alabama and Georgia. Rainfall generally measured 2 to 4 inches across the Lower Southeast and areas of the coastal Carolinas. Heavier localized downpours of more than 5 to 9 inches fell in eastern and coastal areas.

Strong winds twisted plants and blew around bolls, USDA said, but initial reports indicated limited yield loss because most bolls remained unopened and defoliation had not begun. In Georgia, initial reports indicated some producers expected yield losses of around a 10% to 15%.

A period of warm, sunny weather would be welcome to invigorate plants and bleach out any discolored lint in bolls. Defoliation was expected to begin in early cotton in Georgia and South Carolina once fields dry out.

In its September crop estimate, USDA estimated the Georgia crop at 2.7 million bales, down from 2.9 million foreseen a month earlier but up from 2.18 million in 2016. However, it noted that the crop impacts of Irma and Hurricane Harvey had not been fully analyzed.

Futures open interest declined 2,293 lots to 239,663, with December’s down 2,032 lots to 139,056 and March’s down 329 lots to 71,013. Certified stocks declined 1,631 bales to 2,414.

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