DTN Cotton Open: Ticks Lethargically Slightly Higher

©Debra L Ferguson Stock Photography

China’s economic growth held steady at 6.9% in the second quarter. Selling by trend-following funds slowed as they cut net longs to the smallest since April 19, 2016, when they had reversed to net long from net short.

Cotton futures traded lethargically on slight gains early Monday, with December having ticked above the prior-session high.

December hovered up 17 points to 66.75 cents, trading within a 51-point range from 66.60 to 67.11 cents on a contract volume of 1,712 lots. March gained 27 points to 66.38 cents, trading within a 40-point span between 66.20 and 66.60 cents on a turnover of 209 lots.

In outside markets, U.S. dollar index futures ticked down 0.10 to 94.92, while Dow Jones futures and S&P were little changed, up a point and down 0.5 point, respectively. Crude oil dropped 15 cents to $46.39, Brent crude dipped 14 cents to $48.77 and August gold gained $5.80 to $1,233.30. December corn was down 0.51%, November soybeans up 1.31%, September Chicago wheat down 0.24% and September Kansas City wheat down 0.78%.

Earlier, Asian stocks closed higher, up 0.09% in Japan’s Nikkei 225, 0.31 in Hong Kong’s Hang Seng, 0.43% in South Korea’s Kospi and 1.42% in China’s Shanghai Composite Index. European shares traded mixed, up 0.55% in Britain’s FTSE 100, down 0.08% in Germany’s DAX and up 0.17% in France’s CAC 40.

China’s Zhengzhou cotton futures closed on gains and prices settled mostly higher on the China National Cotton Exchange. India’s MCX cotton futures were lower.

In overnight news, economic growth in China, the world’s second largest economy and largest cotton consumer, beat expectations at a steady 6.9% in the second quarter amid unexpectedly strong trade and consumer spending. There have been fears that tighter controls aimed at cooling a surge in debt will weigh on commercial activity.

Meanwhile, selling by trend-following funds slowed to 4,592 lots as they cut their net longs to 20,821 lots in ICE cotton futures-options combined during the week ended Tuesday, according to traders-commitments data from the Commodity Futures Trading Commission after the close Friday.

That was the smallest net-long position of those funds since April 19, 2016, when they had reversed from net short to net long. They liquidated 2,491 longs and added 2,101 shorts in the latest reporting week, their ninth straight week of net-long reductions.

Index funds trimmed their net longs 70 lots to 73,526, while non-reportable traders shaved their net shorts 710 lots to 2,939.

Commercials bought a net 3,952 lots, adding 8,226 longs along with 4,274 shorts to reduce their net shorts to 91,410 lots. Combined open interest increased 5,304 lots to 258,028.

In futures only, noncommercials pared their net longs two percentage points to 13.9% of the open interest. They sold 3,507 lots, liquidating 2,019 longs and adding 1,488 shorts to drop their net longs to 29,378. Open interest gained 6,339 lots to 210,783.

In the market Friday, December lost 201 points for the week after bouncing to a small gain for the day from its lowest close the prior session since Aug. 31. It posted the intraday high on Monday and the low on Friday when it touched a new low since June 26.

The inverted December-March spread traded between 20 and 50 points and widened 26 points to settle at a 47-point December premium on 2,253 lots. March-May traded between 62 and 53 points carry and widened a point to settle on a 60-point May premium on 323 lots.

World values as measured by the Cotlook A Index and Forward A Index gained 100 points to 82.20 and 80 points to 76.85 cents, respectively, narrowing the 2016-17 premium 20 points to 5.35 cents.

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