DTN Cotton Close: Settles Mixed Ahead of Export Sales

Fed raised rates, as expected. Weak weekly old-crop cotton export sales generally expected as prices have rationed tight supplies, but 2017-18 shipments now are projected up 7.2% from last season.

Cotton futures settled mixed, down 140 to up 119 points, as traders awaited the U.S. weekly export sales-shipments report from USDA.

Spot July finished with the largest loss at 93.81 cents, in the lower quarter of its 245-point range from up 45 points at 95.66 to down 200 points at 93.21 cents. July options expire Friday and first notice day is June 25.

December inched up three ticks to close at 92.93 cents, in the upper half of its 177-point range from up 79 points at 93.69 to down 98 points at 91.92 cents. It remained within the range established by early morning. December 2019, where producers have shown some interest, posted the largest gain, closing at 84.30 cents.

The Federal Reserve said it will raise interest rates by a quarter-percentage point, as expected, and expects four hikes in 2018, up from a projection of three increases at the March policy meeting, newswires reported shortly before the cotton close. Cotton traders had little time to react if they’d wanted to.

Volume increased to an estimated 73,200 lots from 57,695 lots the previous session when spreads accounted for 34,489 lots or 60%, EFS 5,664 lots and EFP 180 lots. Options volume rose to 15,657 lots (9,507 calls and 6,150 puts) from 14,094 lots (8,329 calls and 5,765 puts).

Weak old-crop sales as prices have rationed the remaining tight supplies are generally expected in the U.S. weekly export sales-shipments report from USDA at 7:30 a.m. CDT on Thursday. Shipments, however, are expected to remain on a fast track.

Net upland sales for shipment this season have averaged 56,800 running bales and those for next season 181,600 RB the last four weeks, down from 246,300 RB and 254,200 RB the previous four weeks, respectively. By contrast, upland shipments have increased to an average of 443,800 RB from 431,600 RB.

Substantial developments comparatively late in the marketing year resulted in significant changes to trade estimates this month’s world supply-demand estimates, USDA’s Foreign Agricultural Service noted.

With U.S. exports running much higher than expected by USDA and shipping orders remaining high, the 2017-18 estimate was raised 500,000 bales to 16 million, up 7.2% from last season’s 14.92 million and the second highest ever behind only the remarkable 17.67 million bales in 2005-06.

Upland net sales during the last reporting week ended May 31 dwindled to 6,800 RB on gross sales of 56,100 RB and cancellations of 49,300 RB. Some analysts wouldn’t be surprised if cancellations exceed fresh sales in Thursday’s report.

Upland shipments in the last report quickened to a three-year high to 576,400 RB. Exports recently have been especially strong to Vietnam, Turkey and China, where imports were likewise raised a combined 500,000 bales to 16.3 million.

Importer data also has shown strong trade, FAS said in a world markets and trade circular. While some areas outside China, such as Thailand and South Korea, have begun to show some weakness in consumption, Vietnam’s mill use continues to grow at a robust pace, FAS said.

China’s imports, meanwhile, are forecast up 200,000 bales to 5.3 million, motivated by fairly strong March and April imports. Most of that cotton is headed for processing or bonded warehouses and thus doesn’t immediately require import quota.

The USDA projects China’s 2018-19 imports at 7 million bales, compared with 1.4 million metric tons or 6.43 million 480-pound bales forecast this week by China’s Ministry of Agriculture. The ministry estimated 2017-18 imports at 1.2 million tons or 5.51 million bales.

Certified stocks grew 1,051 bales to 79,472 on Tuesday, according to the daily ICE report. Awaiting review were 1,921 bales — 1,228 at Memphis and 693 at Houston. Futures open interest fell 1,947 lots to 309,608, with July’s down 7,847 lots to 56,241 and December’s up 3,300 lots to 187,311.

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