DTN Cotton Close: Rally Continues to 3 Week High

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Hurricane watch issued for Texas coastal area as cotton producers prepare for heavy to torrential rains and winds. Weekly export sales watched for reading on demand following bearish August reports.

Cotton futures settled up 44 to 108 points across the board Wednesday, led again by December on its highest close since Aug. 9.

December settled at 68.89 cents, in the upper half of its 156-point range from up 10 points at 67.91 to up 166 points to 69.47 cents. It posted its highest intraday price since Aug. 10.

March closed up 80 points to 68.26 cents, just above the midpoint of its 138-point range from 67.49 to 68.87 cents. October gained 72 points to settle at 69.60 cents, trading within a 142-point range from 69.11 to 70.53 cents.

Volume increased to an estimated 25,446 lots from 13,256 lots the prior session when spreads accounted for 4,618 lots or 35%, EFS 117 lots and EFP 44 lots. Options volume rose to 11,208 lots (6,036 calls and 5,172 puts) from 6,093 lots (3,739 calls and 2,354 puts).

A hurricane watch issued for the Texas coast, from north of San Luis Pass to High Island, alerted cotton producers to the potential for heavy to torrential rains in a large part of the Lone Star State along with strong winds in coastal areas.

Former Tropical Storm Harvey has strengthened into a tropical depression and is expected to become a hurricane by the time it hits Texas on Friday. The National Hurricane Center said Harvey is likely to intensify as it moves over the warm waters of the Gulf of Mexico.

Heavy rains are expected in eastern Texas, possibly extending far inland into the coming week. Parts of Louisiana and Mississippi also are expected to get a soaking.

Reports have indicated the cotton harvest has nearly wrapped up in the Lower Rio Grande Valley and was far along in the Coastal Bend. However, it was only in the early stages in the Upper Coast.

Meanwhile, USDA’s export sales report for the week ended Aug. 17 will give a reading on demand spanning the release of the crop and supply-demand forecasts on Aug. 10 and the subsequent bearish market reaction.

The report is set for release at 7:30 a.m. CDT on Thursday. December posted lower lows six consecutive sessions following the Aug. 10 reports and now has made four straight higher lows and higher highs.

Net upland sales for the week ended Aug. 10 totaled a healthy 186,700 running bales and went to 18 countries. All-cotton commitments for 2017-18 already have reached a whopping 6.3 million RB, 46% of USDA’s forecast.

While larger supplies from the big August crop forecast offer opportunities for U.S. exports this season, expanded production around the world is expected to provide increased competition. Even so, some cotton analysts contend the export forecast appears understated if the crop comes in as large as USDA says.

The export forecast of 14.2 million 480-pound statistical bales is up 700,000 bales from last month’s projection, but 700,000 bales below the upwardly revised 2016-17 export tally. U.S. cotton’s share of global trade is projected to decline to about 38.5% from 40% in 2016-17 but to remain above the five-year average of 30%.

Futures open interest gained 756 lots to 226,101 on Tuesday, with December’s up 345 lots to 148,113 and March’s up 370 lots to 54,242. Certified stocks declined 1,017 bales

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