DTN Cotton Open: Unable to Hold Overnight Bounce

U.S. housing starts fell for the third consecutive month in May. Heat advisory issued for Saturday in the Lubbock area. Hit-and-miss showers fell overnight.

Cotton futures ticked mostly lower early Friday, unable to hold onto an overnight bounce and trading within prior-session ranges.

July hovered off 19 points to 71.72 cents, near the low of its 90-point range from 72.54 to 71.64 cents on a contract volume of 5,099 lots. December dipped 22 points to 69.25 cents, just off the low of its 73-point range from 69.95 to 69.22 cents on a turnover of 3,968 lots. Thin October was up four points at 71.26 cents.

In the news, U.S. housing starts decreased for the third consecutive month in May, indicating home builders are struggling to meet buyer demand, Dow Jones Newswires reported.

Housing starts dropped 5.5% in May from the prior month to a seasonally adjusted annual rate of 1.092 million, the Commerce Department said. This figure carries a margin of error of 11.9%.

Residential building permits, an indication of how much construction is in the pipeline, fell 4.9% to an annual pace of 1.168 million, the agency said.

Economists surveyed by The Wall Street Journal had expected a 3.4% increase for starts and a 0.8% rise for permits.

In outside markets, U.S. dollar index futures traded down 0.105 to 97.330, one day after posting a 13-session high, while Dow Jones futures and S&P futures ticked little changed. Crude oil gained 38 cents to $44.84, Brent crude added 48 cents to $47.40 and August gold rose by $2.80 to $1,257.40. July corn was up 0.4%, July soybeans up 0.5%, July Chicago wheat up 1.4% and July Kansas City wheat up 1.8%.

Earlier, stocks in Asia closed mostly higher, up 0.56% in Japan’s Nikkei 225, 0.24% in Hong Kong’s Hang Seng and 0.01% in South Korea’s Kospi but down 0.31% in China’s Shanghai Composite Index. European shares traded higher, up 0.62% in Britain’s FTSE 100, 0.28% in Germany’s DAX and 0.71% in France’s CAC 40.

China’s Zhengzhou cotton futures ended with losses and prices closed mixed on the China National Cotton Exchange. Auction sales from China’s state reserves have exceeded 1.5 million metric tons (6.89 million 480-pound bales), Cotlook reported.

On the weather scene, a heat advisory has been issued for Saturday in the Lubbock area on the Texas High Plains. High temperatures are expected to range Saturday from 105 to 109 degrees, dip to 90 degrees on Sunday and rise to 102 and 103 degrees Wednesday and Thursday. No rain is forecast.

Thunderstorms overnight produced hit-and-miss showers ranging mostly from a few hundreds of an inch to half an inch on West Texas Mesonet sites. Tahoka south of Lubbock got 0.18 of an inch, but down the road no rain fell at Lamesa. High heat is sapping soil moisture.

In ICE cotton futures Thursday, July and December tumbled to triple-digit losses and finished on the lowest settlements since last December.

The inverted July-December straddle traded from 264 to 210 points and narrowed 11 points to settle at a 244-point July premium on a volume of 9,774 lots. December-March traded between 17 points March/over to eight points December/over and closed at a three-point December premium from a seven-point March premium on 2,369 lots.

The Cotlook A Index of world values fell 80 points to 84.70 cents, widening the premium over the prior-day July futures settlement 18 points to 11.20 cents.

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