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Weekly Cotton Comments                 11/26 05:17

   March Cotton Edges Higher to Close Midrange 

   Volume light on holiday-shortened week. Treasury yields rose after Fed pick; 
dollar subsequently hit 16-month high. U.S. harvest reached 75% done; upland 
crop 35% classed. Unprecedented challenges cause classing delays. Hedge funds 
bought 3,636 lots during options expiration week. Rainfall bolsters Australian 
dryland cotton prospects.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures finished with mostly small gains in 2021-22 crop year 
deliveries for the holiday-shortened trading eek ended Thursday with 
most-active March up 64 points or 0.56% to 115.78 cents.

   March settled in the middle of its 239-point range from 116.99 cents last 
Friday to 114.60 cents on Tuesday. Maturing December gained 279 points or 2.37% 
to close at 120.38 cents.

   The inverted December-March switch traded out to 485 points and widened 215 
points for the week on a settlement difference of 460, while the also inverted 
March-May spread widened 15 points to settle at 168.

   Only two deliveries have been issued on December. They were issued by ADM 
Investor Services and stopped by SG Americas Securities. Certified stocks 
increased to 400 bales -- seen as a bug hitting the windshield, a veteran 
trader commented -- from only 194.

   Volume sank to a light estimated average volume of 18,090 lots from 41,438 
the prior week. Open interest coming into Wednesday had fallen 8,296 lots from 
a week ago to 261,005, with maturing December down 9,598 lots to 326, March 
down 1,785 lots to 154,743, May up 4,451 lots to 43,214, July up six lots to 
25,673 and red December up 116 lots to 31,452.

   The market was closed Thursday for Thanksgiving and will trade an 
abbreviated session today. Weekly export sales-shipments from USDA and on-call 
data from the Commodity Futures Trading Commission will be released Friday and 
the CFTC trader-commitments data on Monday.

   Cash online cotton sales declined to 35,344 bales on The Seam from 59,134 
bales the prior full marketing week. Prices dropped 105 points to an average of 
111.96 cents per pound, reflecting a 586-point fall to 58.85 cents in premiums 
over loan values. Grower-to-business sales were 22,602 bales and 
business-to-business sales were 5,966 bales.

   Outside vibes included a rise in yields on U.S. government bonds and a fall 
in market-based inflation expectations as reported by The Wall Street Journal 
on Monday as the prospect of a second term for Federal Reserve Chairman Jerome 
Powell reinforced bets that the central bank will fight inflation by raising 
interest rates in coming years.

   Yields, which rise when bond prices fall, were especially steep among bonds 
maturing in the next three to 10 years, a period in which the outlook for Fed 
policy is particularly murky. This contributed to driving the U.S. dollar index 
to a 16-month high Wednesday.

   World cotton values as measured by the Cotlook A Index on Tuesday was quoted 
as having gained 105 points from a week earlier to 127.50 cents, narrowing the 
international basis in relation to the prior-day March futures close to 11.53 

   On the U.S. crop scene, cotton harvesting advanced 10 percentage points for 
the fourth week in a row to reach 75% complete as of Nov. 21, a percentage 
point ahead of last year for the first time this season but four points behind 
the five-year average, USDA's weekly crop progress report showed.

   The harvest in top-producing Texas also moved at a 10-point pace to reach 
70% done, three points behind last year but nine points ahead of the five-year 
average. In Georgia, the second largest cotton state, progress moved at a 
12-point clip to 67% complete, down four points and 11 points, respectively.

   Regionally, the other leading producers in the 15 reporting states compared 
with their five-year averages were 78% harvested in Alabama, down four points, 
in the Southeast; 97% in Arkansas and 91% in Mississippi, down a point and four 
points, respectively, in the Mid-South; 74% in Oklahoma, up nine points, in the 
Southwest; and 71% in Arizona, up six points, in the West. Outside the 
Southwest and West, North Carolina at 82% harvested, up three points, was the 
only state ahead of the average.

   Higher-than-expected yields were reported in the Texas High Plains where 
harvesting continued into the nighttime and gins were running at capacity. 
Harvesting expanded in the Rolling Plains and Edwards Plateau where many areas 
experienced their first freeze of the season, helping remaining leaves to fall 
from plants.

   U.S. upland classing quickened to 1.225 million running bales during the 
week ended Nov. 18 to boost the total for the season to 6.053 million RB, down 
10% from a year ago and 35% of the RB-converted crop forecast.

   Tenderable cotton made up 86.4% for the week, up from 84.7% the week before, 
and 85.4% for the season, up from 82.6% a year ago. Color grades 31 (middling) 
and better totaled 60.9% for the season and included 28.2% in the Southeast, 
44.5% in the Mid-South, 81.5% in the Southwest and 91.8% in the West. Staples 
averaged 36.9 and included 35.6 in the Southeast, 37.8 in the Mid-South 36.5 in 
the Southwest and 37.1 in the West.

   After a slow start, harvest progress over the past month or so has made a 
strong advance, generating with generally favorable yields the accumulation of 
high volumes of cotton in a short time and creating significant challenges for 
the industry.

   Deputy Administrator Darryl W. Earnest of USDA's Agricultural Marketing 
Service said in discussions with the National Cotton Council that a lack of 
labor and the inability of some classing offices to run three shifts are 
creating delays.

   The classing offices are doing everything they can to hire staff, he assured 
the industry, and when they do find new employees a training period is 
required. Also, it's difficult to find parts when classing offices have 
equipment breakdowns, a problem many gins and farmers are facing.

   These unprecedented problems have prevented the AMS cotton division from 
consistently achieving its objective of processing and returning classing 
results within 72 hours.

   On the money-flow front, trend-following hedge funds bought 3,636 lots 
during the week ended Nov. 16, a period when December options expired, to lift 
their net longs to 87,923 lots on the addition of 2,765 longs and the covering 
of 871 shorts.

   Index funds bought a net 2,109 lots to boost their net longs to 84,259, 
while non-reportable traders sold 1,059 lots to cut theirs to 12,206, according 
to the latest traders-commitments data reported by the Commodity Futures 
Trading Commission.

   Commercials sold a net 4,686 lots, liquidating 30,953 longs and covering 
26,267 shorts to raise their net shorts to 184,388 lots. Their net shorts 
jumped to 61.4% of the combined open interest from 46.9%.

   Prices in most-active March ranged over a 322-point range during the 
reporting week from a new contract high at the time of 116.83 cents to 113.61 
cents, which became a new downside risk area. Combined open interest fell 
82,139 lots to a delta-adjusted 300,523.

   On the international scene, rainfall this week was reported to have boosted 
dryland crop prospects in Australia, a major cotton exporter.

   The USDA has estimated the Australian 2021-22 crop at 5.3 million 480-pound 
bales, up 2.5 million bales or 89% from last year. Harvested area is forecast 
at 600,000 hectares or 1.483 million acres. Yields are expected to increase 
because of a forecast decrease in the share of the total area planted to 
dryland cotton this season.

   Irrigated yields are substantially higher than dryland yields. The irrigated 
area comprises about 90% of Australia's total cotton production.  This will be 
the first time in several years that a significant area has been planted in 
dryland cotton. Above-average rainfall has increased water storage for 
irrigated cotton and provided adequate moisture in dryland cotton acres. Higher 
world cotton prices also motivated producers to expand total plantings.    

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