DTN Cotton Close: Finishes Mixed as July Rebounds

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July rallied after falling 998 points from Monday’s “synthetic” high. Mills priced 4,960 July lots last week, cutting their unpriced position to 41,255 lots. The NCC urged maintenance of NAFTA benefits.

Cotton futures finished mixed Friday, with spot July rebounding from a six-session low to finish on a modest gain just off the day’s high.

July settled up 21 points to 79.45 cents, trading within a 108-point range from up 26 points at 79.50 to down 82 points at 78.42 cents. It rallied after falling 998 points from the “synthetic” high of 88.40 cents hit via options on Monday when futures locked limit up at 87.18 cents. July still lost 273 points for the week of tumultuous price swings.

December closed down 19 points to 73.45 cents, trading within a 90-point range from 74.05 to 73.15 cents and easing 27 points for the week.

Traders noted that mills priced 4,960 on-call lots in July last week, reducing their unpriced position to 41,255 lots, according to on-call data reported by the Commodity Futures Trading Commission after the close Thursday. First notice day for July is five weeks ahead.

Volume rose to an estimated 31,838 lots from 28,008 lots the previous session when spreads accounted for 11,314 lots or 40% and EFP for 80 lots. Options volume slowed to 6,206 lots (1,342 calls and 4,864 puts) from 16,285 lots (7,291 calls and 8,994 puts).

On the policy front, the National Cotton Council issued a statement urging the Trump administration to stay involved in the North American Free Trade Agreement and not weaken current provisions.

The industrywide organization said NAFTA has been and can continue to be “a very positive trading platform for U.S. agriculture, including cotton and textiles.”

The Trump administration took the first step on Thursday toward renegotiating the 23-old trade deal with Canada and Mexico. U.S. Trade Representative Robert Lighthizer formally notified congressional leaders the administration would start talks on the deal in as few as 90 days.

Mexico has emerged as one of U.S. raw cotton’s top five export destinations, the NCC noted, adding that NAFTA plays a critical role in North America’s highly integrated textile and apparel chain.

U.S. cotton exports account for nearly all of Mexico’s imports, projected by USDA at 1.03 million bales this season and 980,000 bales in the 2017-18 marketing year beginning Aug. 1.

“With 95% of U.S. cotton exported in some form, we need positive and stable trading relationships with our international customers to maintain a healthy U.S. cotton sector,” Chairman Ronnie Lee, a Bronwood, Ga., cotton producer, said in the NCC statement.

A strengthening of the textile rules of origin and a modernization of NAFTA, he added, “can lead to an expansion of jobs and exports for our nation. This is a very sound way to grow our economy.”

Commodity groups largely stressed a “do no harm” approach after learning the White House had started the renegotiating clock, DTN Ag Policy Editor Chris Clayton reported.

Futures open interest fell 4,565 lots to 258,288 on Thursday, with July’s down 4,669 lots to 118,940, December’s down 164 lots to 119,667 and March’s up 101 lots to 12,884. Total OI grew 5,777 lots on the week.

Certified stocks expanded 15,731 bales to 402,998, up from 320,132 bales a week ago. There were 15,996 newly certified bales, 265 bales decertified and 5,984 bales awaiting review.

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