Liquidation selling from massive net-longs offered mill pricing possibilities. Red flag warning issued for much of the Texas Plains and other areas of the Southwest.
Cotton futures fell to triple-digit closing losses in old-crop deliveries for the third session in a row Tuesday.
Spot March lost the most, closing down 133 points to 77.03 cents, its lowest finish since Dec. 20 and just off the low of the session’s 197-point range from up 57 points at 78.93 to down 140 points at 76.96 cents. It has lost a total of 485 points or 5.9% in three sessions.
May settled down 122 points to 77.97 cents and July closed down 112 points to 78.67 cents. The other contracts finished down 32 to 77 points, with December down 76 points to 74.15 cents.
Plunging U.S. stock futures — the Dow Jones Industrial Average traded down more than 400 points — and increasing certified stocks may have contributed to the pressure on cotton.
Volume dipped to an estimated 57,588 lots from 67,743 lots the previous session when spreads accounted for 32,367 lots or 48%, EFS 660 lots and EFP 274 lots. Options volume dropped to 10,914 lots (7,571 calls and 3,343 puts) from 21,019 lots (9,464 calls and 11,555 puts).
Liquidation selling from massive net longs by the speculative community has allowed mills some scale-down pricing possibilities from their hefty on-call old-crop position.
Mills during the latest reporting week priced a net 2,313 lots in the March, May and July deliveries to reduce their unpriced old-crop position to 113,132 lots, according to Commodity Futures Trading Commission data.
Producers added 72 lots to nudge their unpriced old-crop position up to 10,292 lots. The net call position narrowed 2,385 lots to 102,840, which was 38.3% of the open interest, down from 40.6%.
On the weather scene, a red flag warning has been issued by the National Weather Service for much of the cotton area of the Texas High and Rolling Plains and for other areas of the Southwest.
Warm, dry breezy conditions will create elevated to critical fire weather for much of the Lubbock area Tuesday afternoon, the NWS said. Similar conditions are expected from Wednesday through Monday.
The long dry period, ranked as the third longest on record at Lubbock and threatening to become the second longest, has raised questions about the portion of the region’s cotton acreage that is irrigated.
Figures on the 2017-crop acreage mix won’t be available until after final revisions are released in May, but dryland acres accounted for 58% of the planted cotton area on the High Plains the prior year.
Much of the irrigated acreage is watered with small wells and needs supplemental rainfall for optimum yields. However, tap-rooted cotton is well adapted to the semi-arid area’s growing conditions, and new drought-tolerant varieties can produce remarkable yields on scant, timely rainfall.
Futures open interest declined 5,847 lots to 311,545 on Monday, with March’s down 7,773 lots to 144,611 and May’s up 403 lots to 80,946. Certified stocks grew 10,497 bales to 63,142. The additions included 4,898 bales at Dallas-Fort Worth and 5,599 bales at Memphis.