DTN Cotton Close: Triple-Digit New-Crop Gains

Photo: University of Georgia

A 500,000-bale jump to 16 million in U.S. 2017-18 exports highlighted USDA’s monthly supply-demand report, resulting in corresponding cuts in ending stocks to 4.2 million bales for this season and 4.7 million bales for next season. World 2018-19 ending stocks reduced 725,000 bales.

Cotton futures settled up 23 to 122 points Tuesday as contracts through the 2018-19 marketing year gained more than they lost the previous session.

Spot July settled up 46 points to 95.21 cents, around the middle of its 118-point range from down eight points at 94.67 to up 110 points at 95.85 cents. It remained within the prior-day range and the range established prior to the USDA supply-demand report.

December led the gains, settling on a new contract high close at 92.90 cents. It finished in the upper quarter of its 199-point range from down 48 points at a three-session low at 91.20 cents to up 151 points at 93.19 cents. It touched the day’s high after the USDA report.

Volume slipped to an estimated 57,700 lots from 61,474 lots the prior session when spreads accounted for 40,916 lots or 67%, EFS 1,500 lots and EFP 205 lots. Options volume rose to 14,094 lots (8,329 calls and 5,765 puts) from 10,394 lots (4,033 calls and 6,361 lots).

A 500,000-bale increase to 16 million in projected 2017-18 exports highlighted USDA’s supply-demand estimates, resulting in corresponding cuts in ending stocks to 4.2 million bales for this season and 4.7 million for next season.

The carryover estimate for 2017-18 now has been slashed 1.3 million bales in two months. The revised export estimate is within the range of trade expectations, though some cotton trade analysts continue to insist the USDA forecast still is understated.

May and early June exports were substantially above expectations and shipping orders remain high. Shipments were especially strong to Vietnam, Turkey and China, where imports were raised a combined 500,000 bales.

While trade estimates already have reduced U.S. production prospects, USDA stuck with its prior practice of not revising its June crop forecast ahead of the regularly scheduled National Agricultural Statistics Service report at the end of the month on planted acres and acres still intended for planting.

With still plenty of uncertainty this early on yields and abandonment, USDA left the crop forecast at 19.5 million bales, down from 20.92 million in 2017-18. Ninety percent of the expected acreage had been planted as of Sunday, two percentage points ahead of the five-year average.

Some observers had expected an updated planted area estimate, based on a schedule of USDA release dates for 2018 that had listed a planted acreage report for cotton on June 12.

The USDA raised its projected range of the 2018-19 marketing year average farm price five cents on each end to 60 to 80 cents per pound, compared with an unchanged 67 to 69 cents for 2017-18 and an average of 68 cents last season.

Globally, USDA cut ending stocks 725,000 bales to 83.02 million, down 5.2 million bales from a year earlier, but stocks outside China are expected to rise for the third consecutive year to a record 49.90 million, up 2.86 million bales from the 2017-18 estimate. World beginning stocks for 2018-19 are unchanged on the month at 88.21 million.

World production prospects fell nearly 800,000 bales to 120.4 million on reductions for China, Pakistan and Australia, offset in part by an upward revision for Brazil. Prospective global consumption eased 85,000 bales to 125.35 million, with a 225-bale reduction for South Korea largely offset by increases for Uzbekistan and Vietnam.

Certified stocks edged up 37 bales to 78,421 on Monday, the daily ICE report showed. Awaiting review were 2,656 bales at Memphis. Open interest fell 5,807 lots to 311,555, with July’s down 8,391 lots to 64,088 and December’s 732 lots to 184,011.

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