DTN Cotton Open: Regains Previous-Day Loss Plus

U.S. labor costs unexpectedly fell in the third quarter, another sign of subdued inflation pressures. Cash online cotton sales edged up to 13,670 bales on The Seam.

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Cotton futures inched traded modestly higher in early dealings Wednesday, with March regaining what it lost the prior session plus some.

March hovered up 38 points to 72.89 cents, a tick off the high of its 46-point range from 72.44 to 72.90 cents on a contract volume of 2,476 lots. May ticked up 32 points to 73.58 cents, the high of its 36-point range on a turnover of 620 lots.

This is the last trading day for December, but 35 lots traded on Tuesday and apparently wiped out its open interest at 245 points over March. Still no delivery notices have been posted, with the owners of the certified stocks holding onto the cotton.

In the news, U.S. productivity surged in the third quarter and labor costs fell further, another sign of subdued inflation pressures despite a sturdy economy, Dow Jones Newswires reported.

Productivity rose at a 3% annual rate in the third quarter, the Labor Department said, the biggest jump in three years. The estimate, the agency’s second, reaffirmed its initial take on productivity released last month.

But the agency issued a big downward revision to unit labor costs or the ratio of workers’ compensation to their productivity. Costs fell at a 0.2% annual rate in the third quarter from the previous estimate of rise of 0.5%.

Unit labor costs offer clues about whether consumer prices more broadly will rise or fall in coming months because wage pressures often lead businesses to raise prices for goods and services. Labor costs have fallen 0.7% over the past four quarters.

In outside markets, U.S. dollar index futures traded up 0.100 or 0.1% to 93.435, while Dow Jones Industrial Average futures ticked down 3 points and S&P futures down 0.50 point. Global stocks fell following the S&P 500’s first three-day losing streak since August.

West Texas Intermediate crude oil dropped 77 cents to $56.85, Brent crude fell 59 cents to $62.27 and December gold gained $1.50 to $1,266.40. March corn was up 0.42%, January soybeans up 0.35% and March Chicago wheat and March Kansas City wheat up 0.29%.

Asian stocks closed down 1.97% in Japan’s Nikkei 225, 2.14% in Hong Kong’s Hang Seng, 1.42% in South Korea’s Kospi and 0.29% in China’s Shanghai Composite Index. India’s Sensex dropped 0.63%. European shares were trading mostly lower, down 0.9% in Germany’s DAX and 0.52% in France’s CAC 40 and up 0.18% in Britain’s FTSE 100.

China’s Zhengzhou cotton futures closed higher and prices gained ground on the China National Cotton Exchange. India’s MCX cotton futures declined and S-6 prices were weaker.

In ICE cotton futures Tuesday, March settled on a fractional loss in the lower half of the session range and a tick above the prior-day low.

The March-May spread traded between 80 and 70 points of carry and widened five points to settle at a 76-point May premium on 4,574 lots. May-July traded between 45 and 33 points carry and widened two points to close at a 44-point premium on July on 1,091 lots.

Cash online sales increased modestly to 13,670 bales from 13,170 bales on The Seam on prices averaging 69.46 cents, up from 69 cents. Premiums over loan rates averaged 18.16 cents, down from 18.57 cents. Loan values rose to an average of 51.30 cents from 59.43 cents. Offerings were 101,429 bales.

Grower-to-business sales of 12,142 bales brought an average price of 69.33 cents per pound, while business-to-business sales of 1,528 lots sold for an average of 70.52 cents. All the sales were from the Southwest. Staples 35 or more accounted for 10,077 bales of the G2B sales and all but four bales of the B2B sales.

The Cotlook A Index of world values dropped 70 points to 72.95 cents, leaving the premium over the prior-day March futures settlement unchanged at 10.37 cents. The index reflected a premium over the three-day AWP calculation of 17.85 cents.



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