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DTN Cotton Close: Surges to Triple-Digit Gains

Ernst Undesser
By Duane Howell DTN Cotton Correspondent December 7, 2017

DTN Cotton Close: Surges to Triple-Digit Gains

Texas A&M AgriLife Extension Service photo by Kathleen Phillips

U.S. 2017-18 export commitments reached 73% of the USDA estimate, compared with 53% of final 2016-17 shipments at the corresponding point last season. Shipments hit marketing year highs for both upland and Pima.

Cotton futures surged to triple-digit closing gains in 2017-18 marketing year contracts Thursday, led by a 2.08% advance in spot March.

March settled up 151 points to 74.23 cents, just off the high of its 217-point range from down 62 points at 72.10 to up 155 points at 74.27 cents. It triggered buy stops above last week’s high, settled above the September high of 74.20 cents and came within 90 points of closing the continuation chart gap left by the expiration of the December contract.

May advanced 125 points to close at 74.64 cents, also near the high of its 193-point range from 72.78 to 74.71 cents, and July settled up 102 points to 74.82 cents. The other contracts closed up 48 to 85 points.

The market broke out of a rather tight consolidation pattern as March rallied off the session low set following the USDA weekly export sales-shipments report.

Volume climbed to an estimated 37,940 lots from 19,020 lots the previous session when spreads accounted for 6,321 lots or 33% and EFP 7 lots. Options volume rose to 10,085 lots (6,799 calls and 3,286 puts) from 8,933 lots (3,443 calls and 5,490 puts).

Net U.S. all-cotton sales for shipment this season of 173,800 running bales during the week ended last Thursday, down from 285,100 RB the prior week, boosted 2017-18 commitments to 10.267 million RB.

The new sales included gross sales of 243,900 RB of upland and 35,700 RB of Pima, with cancellations of 57,300 RB and 48,500 RB, respectively. Rumors of cancellations had circulated ahead of the USDA report.

Commitments — outstanding sales of 7.716 million RB plus shipments — still reached 73% of the USDA export forecast, compared with 53% of final 2016-17 exports at the corresponding point last season.

The cumulative sales lead over year-ago commitments narrowed 236,000 RB to a still-bulging 2.605 million RB or to 34%.

All-cotton shipments jumped to a marketing year high of 270,300 RB, including crop year highs for both upland and Pima of 246,800 RB and 23,500 RB, respectively.

This brought exports for the season to 2.551 million RB, narrowing the lag behind year-ago shipments by 33,000 RB to 445,000 RB or to 15%. Shipments were 18% of the USDA projection, compared with 21% of final exports a year ago.

To achieve the forecast, shipments need to average roughly 338,700 RB over the 35 weeks remaining in the marketing year, while weekly sales averaging approximately 111,700 RB would match the export estimate.

Net all-cotton sales for shipment next season of 66,100 RB, up from 52,800 RB the week before, hiked 2018-19 commitments to 1.363 million RB, around 2.6 times forward bookings a year ago of 530,000 RB.

The 2017-18 Pima cancellations, exceeding new sales by 12,800 RB, came amid speculation that the extra-long staple production may not reach the USDA forecast.

Futures open interest gained 668 lots to 249,869 on Wednesday, with March’s up 475 lots to 170,206 and May’s down 291 lots to 42,481. Certified stocks remained at 47,628 bales.

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Ernst Undesser
By Duane Howell DTN Cotton Correspondent December 7, 2017