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DTN Cotton Close: Settles on Limit Gains in March, May

Ernst Undesser
By Duane Howell DTN Cotton Correspondent January 11, 2018

DTN Cotton Close: Settles on Limit Gains in March, May

©Debra L Ferguson Stock Photography

U.S. all-cotton export commitments climbed to 80% of USDA’s December forecast. Shipments quickened to a marketing year high and were about 26% of the export estimate. Pakistan removed cotton import duty.

Cotton futures closed on daily limit and near-limit gains in current-crop deliveries Thursday, driven partly by what analysts described as panicked mill fixations amid speculative buying and another round of strong weekly export sales.

Spot March hit the 300-point limit first and stayed there to close at 82.65 cents, rallying from a 23-point loss at 79.42 cents. May followed on a limit move to settle at 82.96 cents, trading within a 323-point range.

July, the last of the 2017-18 marketing year contracts, finished up 285 points to 83 cents, near the high of its 317-point range from down 18 points at 79.97 to up 299 points at 83.14 cents.

The other contracts settled up 26 to 132 points. December closed up 50 points to 75.42 cents, just off its new contract high of 75.47 cents.

The latest Commodity Futures Trading Commission on-call report showed mills had a record high unpriced position of 154,288 lots (15.249 million bales) as of Dec. 29, with 50,426 lots (5.043 million bales) in March.

Volume jumped to 64,086 lots from 33,799 lots the previous session when spreads accounted for 19,617 lots or 58%, EFP 57 lots and EFS 53 lots. Options volume leaped to 31,479 lots (17,628 calls and 13,851 puts) from 8,441 lots (4,320 calls and 4,121 puts).

Net U.S. all-cotton export sales of 281,200 running bales during the week ended Jan. 4, up from 199,400 RB the previous week, boosted 2017-18 commitments to 11.532 million RB, USDA’s weekly report showed.

Commitments — outstanding sales of 7.832 million RB plus shipments — topped cumulative sales a year ago by 2.489 million RB, maintaining a lead of 28%, and were 80% of the USDA export forecast. A year ago, commitments were 62% of final 2016-17 exports.

All-cotton shipments quickened to a marketing year high of 289,600 RB, up from the prior week’s 218,900 RB, and brought exports for the season to 3.7 million RB.

Shipments narrowed the lag behind exports a year ago by about 68,000 RB to 531,000 RB or 13% and amounted to about 26% of USDA’s December projection. Last year, shipments were about 29% of final exports.

To achieve the forecast, shipments need to average roughly 367,400 RB a week for the 29 weeks remaining in the marketing year, while weekly sales averaging approximately 97,400 RB would match the export estimate.

Sales of 92,900 RB for shipment next season hiked combined sales for both crop years to 374,100 RB, up from 292,600 the week before, and raised 2018-19 commitments to 1.366 million RB. New-crop commitments were about 2.4 times forward bookings a year ago of 570,600 RB.

In international news, the Pakistani government’s withdrawal of sales tax and customs duty on cotton imports went into effect on Monday. Pakistan is the world’s fourth largest cotton producer, but its crop has fallen short of earlier expectations.

The Pakistani textile sector, which contributes more than 60% of the country’s total exports of $20 billion, had been reported seeking the abolition of a 4% customs duty and 5% sales tax since last year.

U.S. cotton sales to Pakistan have totaled 1.179 million RB thus far this season, ranking it as the third largest export customer.

Futures open interest expanded 2,151 lots to 288,105 on Wednesday, with March’s down 846 lots to 167,170 and May’s up 2,028 lots to 60,163. Certified stocks were unchanged at 49,742 bales.

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Ernst Undesser
By Duane Howell DTN Cotton Correspondent January 11, 2018