DTN Cotton Close: Settles Lower Across Board

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March closed below lows of prior seven weeks. Sales decline expected in the U.S. weekly export sales-shipments report. World mill use expected to exceed production next season, NCC says.

Cotton futures finished lower across the board Wednesday, down 22 to 78 points, with March settling below lows of the prior seven weeks.

March lost the most, closing at 75.60 cents, its lowest finish since Dec. 19 and near the low of its 104-point range from up seven points at 76.45 — where it opened overnight — to down 97 points at 75.41 cents. The low matched the intraday low of Dec. 21.

May finished down 43 points to 76.97 cents, trading within a 66-point range from 77.41 to 76.75 cents, and July closed down 42 points to 78 cents. December dipped 23 points to settle at 75.64 cents.

Traders awaited the U.S. weekly export sales-shipments report, set for release by USDA at 7:30 a.m. CST on Thursday.

Volume slowed to an estimated 50,400 lots from 66,348 lots the previous session when spreads accounted for 47,759 lots or 72%, EFS 1,404 lots and EFP 314 lots. Options volume dipped to 3,577 lots (1,602 calls and 1,975 puts) from 8,847 lots (4,670 calls and 4,177 puts).

A drop in export sales is expected amid talk that mill inquiries slowed ahead of USDA’s supply-demand report last Thursday. Inquiries lately are said to have featured low-micronaire cotton at discounted prices.

Prices during the reporting week ended Feb. 8 ranged from 78.82 to 75.82 cents, basis March futures, and ended with a loss of 173 points for the period to 76.22 cents.

Net upland sales for the week ended Feb. 1 jumped to 402,400 running bales and upland shipments hit a marketing year high of 432,500 RB, up 75% and 56%, respectively, from the four-week averages. Upland sales the last four weeks have averaged 262,100 RB and upland shipments have averaged 315,000 RB.

Sales for shipment next season of 118,500 RB hiked the total for both crop years to a bulging 528,600 RB for the week and brought 2018-19 all-cotton commitments to 1.73 million RB, up from 748,000 RB in forward bookings a year ago.

In its annual economic outlook, the National Cotton Council says world mill use is expected to exceed production in the 2018-crop marketing year, resulting in a 5.4-million-bale drawdown in global ending stocks.

The reduction would be due to reduced inventories in China. An additional 10-million-bale reduction in China’s stocks is expected by the NCC following an 8-million-bale drop foreseen by USDA this season.

World mill use is projected to increase by about 3% to 124.8 million bales in 2018-19, exceeding production of 119.3 million bales. Production is expected to decline from this season’s output and consumption to climb to the highest in more than a decade.

While projections of global consumption exceeding production normally would be supportive of prices, implications for the coming year may not be as clear, the council says, as stocks outside China are projected to increase 8.6 million bales this season and 4.6 million bales next season.

Still, several factors point to a more optimistic longer-term outlook. China, the world’s largest cotton consumer, will begin its next round of reserve auctions next month and a successful series could position it for larger cotton imports.

Futures open interest gained 314 lots to 266,641 on Tuesday, with March’s down 7,941 lots to 30,770 and May’s up 5,251 lots to 117,335. Certified stocks increased 3,321 bales to 88,442. Awaiting review were 1,253 bales at Galveston.

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