DTN Cotton Close: Explodes to New Contract Highs

©Debra L Ferguson Stock Photography

Heavy unpriced on-call sales and hot, dry weather forecast for the droughty Texas Plains triggered the rally. Mills priced 44 on-call lots in July, leaving their unfixed sales at 55,554 lots. U.S. outstanding 2017-crop upland loans declined to 2.114 million RB.

Cotton futures, unable to gain downside traction, exploded Friday out of relatively quiet trading ranges, soaring to some new contract highs.

July jumped 240 points to settle at 86.90 cents, near the high of its 304-point range from down 48 points at 84.02 cents to up 256 points at 87.06 cents, a new contract high. Maturing May, facing its last trading day on Tuesday, settled up 190 points to 86.35 cents. Its contract high is 86.60 cents set March 6.

December gained 98 points to close at 80.57 cents, near the high of its 140-point range from 79.30 cents to a new contract high at 80.70 cents. For the week, July advanced 239 points and December gained 130 points.

Heavy unpriced on-call mill sales and forecasts for hot, dry weather next week in the drought-stricken Texas High Plains, the nation’s largest cotton patch, triggered the rally.

Volume quickened to an estimated 34,000 lots from 25,133 lots the prior session when spreads accounted for 7,023 lots or 28%, EFP 485 lots and EFS 23 lots. Options volume rose to 17,449 lots (14,563 calls and 2,886 puts) from 8,811 lots (4,522 calls and 4,289 puts).

Mills priced 44 on-call lots in July last week, nudging their unfixed sales to a still heavy 55,554 lots, according to data reported by the Commodity Futures Trading Commission after the close Thursday.

Producers priced 323 lots to reduce their unpriced position to 5,796 lots. The net call difference thus edged up 279 lots to 49,758 lots, which was 37.1% of the rising open interest, compared with 36.9% a week earlier. The unpriced mill position outweighed that of producers by 9.58 to one.

A year ago, July unpriced positions were 45,384 lots for mills and 3,930 lots for producers, the net call difference of 41,454 lots represented 30.3% of the open interest and the ratio of potential mill buying to potential producer selling was 11.5:1.

Across the board, mills added 3,747 lots to lift their total unpriced sales to 160,068 lots, just below the all-time high of 160,636 lots on March 16. Producers priced 30 lots, leaving them with an unfixed 45,621 lots.

On the crop scene, U.S. outstanding 2017-crop upland loans declined 144,698 running bales to 2.114 million RB during the week ended Monday, according to the latest USDA figures.

Repayments were made on 167,415 RB and entries were 22,717 RB. Upland under loan included 129,409 RB of Form A issued to individual growers and 1.984 million RB of Form G loans issued to marketing cooperatives or loan servicing agents. The largest outstanding loan concentration was in Texas — 513,794 RB, all in Form G.

Certified stocks increased five bales to 75,638 bales, the exchange report on stocks in deliverable position showed Friday. This was up 4,077 bales from a week ago.

Open interest rose by 2,956 lots to 275,892 lots coming into Friday’s session, with July’s up 931 lots to 139,741 lots and December’s up 1,421 lots to 109,266 lots. For the week, July’s OI grew 4,413 lots and December’s increased 4,163 lots.

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