DTN Cotton Close: Finishes Lower Ahead of USDA Report

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Hot, dry week forecast for the Texas Plains after welcome rain fell in parts of the region Sunday. Bulk of the dryland acres remained dry. U.S. crop cut expected. Unpriced on-call sales figured prominently in driving July to a new high. Producers’ largest call activity focused on December 2019.

Cotton futures reversed from session highs posted overnight to finish lower Monday on the eve of USDA’s monthly supply-demand report.

July settled down 19 points at 94.75 cents, in the lower third of its 250-point range from down 94 points at 94 cents to up 156 points and a new contract high at 96.50 cents. It approached the 2014 high of 97.35 cents set on the May contract in March that year. July options expire Friday.

December dropped 92 points to close at 91.68 cents, below the prior-session low and near the low of its 198-point range from 93.50 cents to 91.52 cents. The other contracts settled down 33 to 108 points.

Volume slowed to an estimated 61,474 lots from 77,129 lots the previous session when spreads accounted for 43,045 lots or 56%, EFS 2,000 lots and EFP 169 lots. Options volume slipped to 10,394 lots (4,033 calls and 6,361 puts) from 34,344 lots (19,277 calls and 15,117 puts).

Another hot, dry week appears in prospect for the Texas High Plains cotton area around Lubbock after spotty thunderstorms and showers brought welcome moisture to parts of the droughty region Sunday.

Temperatures are expected to reach 101 degrees Monday afternoon at Lubbock and 105 degrees at Seminole in Gaines County to the southwest where a heat advisory has been issued. No rain is foreseen in the Lubbock area through rest of the week with high temperatures mostly in the middle to high 90s.

Rainfall recorded by the West Texas Mesonet showed the heaviest 96-hour totals to Monday morning along fringes of the Caprock where Floydada northeast of Lubbock got 1.69 inches into the Rolling Plains where Snyder registered 2.76 inches. The large bulk of the dryland acreage in the High Plains west of the Caprock remained dry.

Heat and winds following the hottest May on record at Lubbock have continued to take a toll on soil moisture from rains in parts of the region earlier this month, fueling expectations for heavy cotton abandonment. Relatively little dryland cotton had emerged last week, reports indicated.

This has played a large role in expectations for a reduced U.S. crop forecast in USDA’s supply-demand estimates on Tuesday. A Bloomberg survey of cotton analysts and traders showed a projected reduction from a month ago of around 400,000 bales.

Meanwhile, the latest weekly on-call data figured prominently in driving July to back-to-back new contract high closes at the end of last week and to a new contract high in the Sunday night session.

Mills entered last week with outstanding call sales in July of 34,650 lots, down 6,849 lots from a week earlier, while producers priced 1,709 lots to reduce their call position to 2,811 lots. This resulted in the net call difference dropping 5,140 lots to 36,909, which was 31.8% of July’s declining open interest, compared with 31.9% the week before.

The largest call activity by producers was in the December 2019 contract where they added 1,045 lots to boost their position there to 14,229 lots. Mills added 145 lots to raise theirs to 10,863 lots.

Certified stocks nudged up seven bales to 78,384 on Friday, according to the daily ICE report. Awaiting review were 2,893 bales at Memphis. Open interest declined 4,733 lots to 317,362, with July’s down 7,818 lots to 72,479 and December’s up 728 lots to 184,743.

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