DTN Cotton Close: Again Settles on Slight Losses

©Debra L Ferguson Stock Photography

Prospects for rain in the droughty Southwest, expected to account for 61% of the projected U.S. upland acreage, weighed on market sentiment as July extended the prior-session reversal off a new five-week high.

Cotton futures settled on slight losses Tuesday, with most-active July extending the prior-session reversal off a new five-week high.

July closed down 27 points to 82.95 cents, in the upper half of its 152-point range from up 27 points at 83.49 cents to down 125 points at 81.97 cents. It fell below its nine-day and 18-day moving averages but closed above them.

May finished down a fractional 12 points to 83.13 cents, also in the upper half of its 152-point range from 83.58 cents to 82.06 cents. First notice day for May deliveries is next Tuesday when daily trading limits will be lifted.

December eased 14 ticks to close at 78.40 cents, just above the midpoint of its 76-point range from up 14 points at 78.68 cents to down 62 points at 77.92 cents. The bull July-December straddle narrowed 13 points to a 455-point July premium.

Volume increased to an estimated 41,400 lots from 40,358 lots the previous session when spreads accounted for 22,756 lots or 56%, EFP 872 lots and EFS 590 lots. Options volume rose to 9,213 lots (4,436 calls and 4,777 puts) from 6,450 lots (3,777 calls and 2,673 puts).

Prospects for rain later this week in the droughty Southwest, viewed by some traders as a possible harbinger of an improved weather pattern, weighed on the market. Views of many that USDA still underestimated 2017-18 U.S. exports in last week’s upwardly revised supply-demand report may have contributed to support.

The Southwest is expected to plant 8.11 million acres to upland cotton this spring, more than 500,000 acres or 7% above last year’s acreage, according to the National Agricultural Statistic Service’s survey of growers early last month.

Reduced plantings to corn, soybeans and peanuts are expected to boost the region’s upland cotton acreage to the highest since 1980 when nearly 8.6 million acres were planted in the industrial fiber crop.

This would account for 61% of the total U.S. upland acreage this year, similar to the previous two seasons. As a result, USDA’s Economic Research Service has noted, production prospects in the region will continue to play a key role in the 2018 cotton crop.

The Texas High Plains — no district estimates were made in the March survey — with upland plantings last year of 4.38 million acres accounted for 58% of the Southwest’s 2017 upland area of 7.578 million acres and 35% of the U.S. acreage of 12.36 million.

The prospective plantings estimates will be updated in June with NASS’ report on planted acreage and acres still intended for plantings. This report is expected to contain district estimates for Texas.

Certified stocks grew 671 bales to 68,534 on Monday, with 1,319 newly certified bales and 648 bales decertified. Futures open interest dropped 3,642 lots to 268,410, with May’s down 8,159 lots to 20,364, July’s up 3,498 lots to 130,640 and December’s up 846 lots to 93,596.

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