DTN Cotton Close: Continues Lower for 4th Consecutive Session

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Fed raised short-term interest rates as expected. Unexpected U.S. May retail sales decline may have added to the negative cotton market sentiment. Traders awaited U.S. weekly export sales-shipments report.

Cotton futures, which have sustained considerable technical damage the last few weeks, settled lower across the board for the fourth consecutive session Wednesday, losing 64 to 98 points.

July lost the most, finishing on a new low close for the move at 73.50 cents, just off the low of its 143-point range from up 35 points at 74.83, to down 108 points at 73.40 cents, on a volume of 16,499 lots.

December closed down 87 points to 70.95 cents, also just off the low of its 114-point range from 72 to 70.86 cents on a turnover of 19,634 lots. That was its lowest close since Jan. 17. October lost 94 points to settle at 72.92 cents.

U.S. dollar index futures initially dipped and quickly bounced but remained under pressure after the Federal Reserve said it would raise short-term interest rates. U.S. stocks initially showed muted reaction to the widely expected decision to raise rates for the second time in three months.

Fed officials said they would increase their benchmark federal-funds rate by a quarter percentage point to a range between 1% and 1.25% and penciled in one more increase later this year if the economy performs in line with their forecast, Dow Jones Newswires reported.

The news came shortly before the cotton close. Volume slipped to an estimated 40,837 lots from 51,422 lots the previous session when spreads accounted for 28,089 lots or 55%, EFS 2003 lots and EFP 1,145 lots. Options volume rose to 13,168 lots (5,205 calls and 7,963 puts) from 11,764 lots (4,912 calls and 6,852 puts). July options expire Friday.

The biggest drop in U.S. retail sales in May in 16 months may have added to the negative cotton market sentiment. Consumer spending declined at gasoline stations, department stores and electronic shops.

Overall retail sales fell 0.3% in May from a month earlier, the Commerce Department said. That marked the largest drop since January 2016. Cheaper gasoline was a big factor. Sales fell 2.8% at gasoline stations and 1% at department stores.

Retail sales are a big component of consumer spending, which in turn accounts for roughly two-thirds of U.S. economic output. Economists had expected sales to increase slightly in May. Retail sales have climbed a solid 3.9% this year from the first five months of 2016.

Meanwhile, traders awaited the U.S. export sales-shipments report set for release at 7:30 a.m. CDT on Thursday for the week ended June 8.

Some analysts expect the USDA report to show increases from the prior week’s upland sales of 82,700 running bales for shipment this season and 187,500 RB for next season. Upland shipments generally are expected to remain above the weekly pace needed to meet the 2016-17 export forecast.

Upland sales the last four weeks have averaged 82,600 RB per week for 2016-17 and 187,100 RB for 2017-18, while upland shipments have averaged 351,800 RB.

Futures open interest increased 472 lots Tuesday to 234,543, with July’s down 6,439 lots to 45,403, December’s up 4,804 lots to 155,910 and March’s up 1,856 lots to 23,089.

Certified stocks grew 9,076 bales to 468,011. There were 10,221 newly certified bales and 1,145 bales decertified. Awaiting review were 7,792 bales, including 1,408 at Galveston and 6,384 at Memphis.

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