DTN Cotton Open: Market Extends Steep Losses

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U.S.-Sino trade tensions keep pressure on. Beneficial rains doused much of the Texas High Plains cotton area. Cash grower sales declined to 45 bales on The Seam, bringing an average of 51.10 cents per pound.

Cotton futures extended steep losses in early dealings Monday, remaining under pressure after touching a 14-session low in December in the early minutes of overnight trading.

December ticked down 241 points to 87.44 cents, trading within a 242-point range from 89.52 to 87.10 cents on a contract volume of 11,400 lots. Soon-to-mature July dropped 215 points to 88.57 cents, trading within a 230-point range from 90.55 to 88.25 cents on a turnover of 2,723 lots.

The market traded within the overnight range amid rising trade tensions after President Donald Trump went ahead with tariffs on Chinese imports and Beijing immediately responded in kind and after beneficial rains fell in a key U.S. cotton area.

Rains doused much of the Texas High Plains cotton area over the weekend, including some areas that had missed our earlier. The heavier amounts again fell in northern areas, but some southern areas also got good rains, with Lamesa and Welch in Dawson County reporting 1.40 and 2.02 inches, respectively, in the 72-hour period to late Sunday afternoon. Most cotton sites got at least a quarter to half an inch.

The rains will be especially beneficial to lightly watered or “semi-irrigated” cotton in areas with small wells, and will help to sustain some dryland cotton stands and bring some dry-plantings to a stand. However, large dryland abandonment still is expected, with federal crop insurance planting deadlines expired on the High Plains. Rain chances in the Lubbock area are rated at 20% Monday, 30% Wednesday and 20% Thursday.

Meanwhile, trend-following funds reduced their net longs 2,412 lots to 109,209 in ICE cotton futures-options combined during the week ended Tuesday, traders-commitments data reported by the Commodity Futures Trading Commission after the close Friday showed.

They liquidated 2,140 longs and added 272 shorts during a week in which December traded from 88.40 to the contract high of 94.82 cents. Index funds cut their net longs 1,679 lots to 77,973, while non-reportable traders boosted theirs 2,400 lots to 13,062.

Commercials bought a net 1,690 lots, adding 8,084 longs along with 6,394 shorts to shave their net shorts to 200,244 lots. Open interest grew 9,328 lots to a record 444,013.

In futures only, non-commercials’ net longs eased 0.3 of a percentage point to 39.7% of the open interest. They sold 3,453 lots, adding 3,062 shorts and liquidating 391 longs to pare their net longs to 122,946 lots. By contrast, non-reportable traders raised their net longs 2,270 lots to 14,978. Combined, non-commercial and non-reportable net longs dipped 1,183 lots to 137,924. Open interest fell 10,937 lots to 309,608.

In the market Friday, December settled at a seven-session low close and its lowest weekly finish since May 25. It snapped a string of four higher weekly closes in a row gains totaling 12.36 cents or 15.4%.

The inverted July-December straddle traded between 45 and 183 points and widened 42 points to close at an 87-point July premium on 7,394 lots. December-March traded between an inverted six and 18 points and narrowed a point to settle at a nine-point December premium on 4,742 lots.

Cash grower-to-business sales declined to 45 bales on The Seam, bringing an average of 51.10 cents per pound, while business-to-business sales of 183 bales changed hands at an average of 56.53 cents a pound. Staples 35 or more totaled 43 bales of the G2B sales and 151 bales of the B2B sales. All the cotton was from the Southwest.

The Cotlook A Index of 2017-18 world values was unchanged at 101.45 cents, widening the premium over the prior-day July futures settlement 40 points to 8.04 cents.

In outside markets, Dow Industrial Average futures traded down 204 points, S&P futures dropped 17 points and global stocks fell amid the tit-for-tat U.S.-China tariffs. September U.S. dollar index futures inched up 0.020 to 94.465.

July West Texas Intermediate crude oil ticked up 10 cents to $65.16 and August Brent crude gained 61 cents to $74.15. August gold traded up $4.20 to $1,282.70. July corn was down 0.9%, July soybeans down 0.22% and July Kansas City wheat down 1.49%.

Asian stocks closed lower, down 0.75% in Japan’s Nikkei 225, k0.43% in Hong Kong’s Hang Seng and 1.16% in South Korea’s Kospi. India’s Sensex was down 0.21%. China’s markets were closed for a holiday. European shares were trading lower, down 0.39% in Britain’s FTSE 100, 1.15% in Germany’s DAX and 1.4% in France’s CAC 40.

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