DTN Cotton Close: Finishes on Strong Gains

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Large outstanding July mill on-call sales and weather concerns in China contributed to the advance. Mills priced 5,442 on-call lots in July, reducing their unpriced sales to 49,643 lots. U.S. premium in Far East widened 25 points.

Cotton futures finished on strong gains Friday, led by spot July on the second highest settlement in the life of the contract.

July closed up 152 points at 86.55 cents, in the upper half of its 255-point range from up two ticks at 85.05 to up 257 points at 87.60 cents. It got within 48 points of its contract high set May 7 and closed on its highest finish since the contract high settlement of 86.90 cents on May 4.

December hit a new contract high at 82.94 cents and finished also in the upper half of its 160-point range, up 98 points to 82.43 cents, its third contract high close in a row. For the week, July gained 193 points and December advanced 219 points.

Large outstanding mill on-call sales remaining in July and renewed strength in China’s internal cotton prices amid ongoing concerns about weather conditions in Xinjiang, the country’s largest cotton producing region, contributed to the advance.

Traders appeared to have adopted a “show me” attitude regarding forecasts for daily thunderstorms and showers in the Texas High Plains around Lubbock considering the lack of widespread coverage of meaningful planting rains from other recent activity.

Volume quickened to an estimated 43,716 lots from 39,246 lots the prior session when spreads accounted for 16,213 lots or 41%, EFS 1,505 lots and EFP 91 lots. Options volume jumped to 28,325 lots (17,365 calls and 10,960 puts) from 14,167 lots (9,798 calls and 4,369 puts).

Mills priced 5,442 on-call lots in the July contract last week, reducing their unpriced sales to 49,643 lots, according to data reported by the Commodity Futures Trading Commission after the close Thursday.

Producers added 620 lots to raise their unfixed July position to 6,206 lots. The net call difference thus dropped 6,062 lots, 32.2% of the declining July open interest, compared with 34.5% a week earlier. Mills had 7.99 contracts to buy to every one producers had to sell.

A year ago, mills had outstanding sales in July of 41,255 lots and producers had an unfixed position of 3,571 lots, with the net call difference of 37,684 lots representing 28.6% of the open interest.

Across the board, mills priced 628 lots to trim their unpriced sales to 163,052 lots from the prior week’s record high, while producers added 510 lots to raise their unfixed position to 45,969 lots. Last year, total unfixed positions were 112,230 lots for mills and 35,924 for producers. Open interest last week was 283,522 lots, compared with 255,100 lots a year ago.

On the competitive pricing scene, the average of the five lowest priced world growths for the Far East lost 149 points to 91.14 cents during the week ended Thursday, according to USDA calculations, while the lowest quoted U.S. cotton landed there fell 125 points to 93.25 cents.

The U.S. premium thus widened 25 points to 2.11 cents. The adjusted world price for the marketing week ending next Thursday is 74.09 cents, reflecting quality and transportation differentials, with the marketing loan gain of course remaining at zero.

The fine count adjustments for qualities better than 31-3-35, reflecting differences between premiums in the U.S. and international markets, are 1.31 cents for 2017-crop cotton and 1.36 cents for the 2018 crop. World forward quotes for 2018 averaged 90.28 cents, up 22 points.

Certified stocks dropped 43 bales to 79,390 on Thursday, according to ICE’s daily report Friday. There were 221 newly certified bales and 264 bales decertified. Open interest increased 860 lots to 287,314, with July’s down 612 lots to 130,141 and December’s down 254 lots to 120,761.

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