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Weekly Cotton Comments                 08/05 05:04

   Benchmark December Finishes Mid-Range at 94.62

   China cut 2021-22 bookings as marketing year ended. Cotlook A Index finished 
the 2021-22 crop year at a nominal 131.40 cents. U.S. crop conditions improved. 
Harvest expanding in South Texas. Stands continued to fail on the High Plains. 
Spec community shaved net longs only 451 lots. Unpriced mill December-July call 
sales rose 1,515 lots.

Duane Howell
DTN Contributing Cotton Analyst

   Benchmark December cotton futures gave back 159 points or 1.65% to close the 
marketing week ended Thursday at 94.62 cents after posting the highest price 
last Friday since June 27.

   December finished this first period of the new cotton marketing year, which 
began Monday, in the middle of the week's 605-point trading range from the high 
of 97.65 cents last Friday to the low of 91.60 cents on Tuesday. December ended 
July at 96.74 cents, down 208 points or 2.1% for the month.

   The inverted December-March spread narrowed 125 points for the week to 
settle at 229. December 2023 closed little changed 81.76 cents.

   Volume remained light at an estimated average of 19,558 lots per session. 
Open interest gained 3,097 lots to 188,086, with December up 157 lots to 
108,646 and March up 2,087 lots to 36,499. Certificated stocks declined 3,725 
bales to 4,552 bales.

   Sporadic cash online sales totaled 454 bales on The Seam. The turnover 
included 278 bales of 2022-crop cotton. Prices averaged 95.95 cents, reflecting 
premiums over loan values of 44.05 cents. Sales included 143 bales on the 
grower-to-business exchange and 311 bales on the business-to-business platform.

   Coming into Thursday, world 2022-23 values as measured by the Cotlook A 
Index had gained 95 points from the Forward A Index a week earlier, widening 
the international basis 121 points to 18.44 cents over the prior-day December 
futures close.

   The 2021-22 A Index recorded a final value of 131.40 cents, designated as 
nominal during the late stages of the marketing year because of extremely thin 
nearby offers. The final value compared with a high of 173.45 reached on May 5 
and an average for the 12-month period just below 132 cents per pound.

   The Forward A Index (2022-23), the more relevant value for some time and now 
the current index, ended July at 114.10 cents, a net decline of 85 points, 
despite a strong rally during the second half of the month. It will stand alone 
as the current measure until after the year-end when a new-crop (2023-24) index 
will be introduced as soon as sufficient market evidence is available, Cotlook 

   On the demand scene, net U.S. upland export commitments for 2021-22 fell 
112,400 running bales during the week ended July 28, largest decline of the 
marketing year. Cancellations of 132,400 RB exceeded new sales of 20,000 RB.

   China cancelled 99,000 RB, had 1,400 RB in destination changes and bought 
5,400 RB, cutting its upland commitments by 95,000 RB to 4.936 million RB. But 
China still has the largest all-cotton commitments of any country at 5.032 
million RB, 31% of the total. The next highest is Vietnam with 14%.

   With three days left in the marketing year, all-cotton 2021-22 commitments 
stood at 16.068 million RB, down 982,000 RB or 6% from a year ago. Commitments 
were 112% of the USDA export estimate, compared with 107% of final 2020-21 
shipments a year ago.

   All-cotton commitments for 2022-23 rose to 4.897 million RB on net sales of 
75,900 RB, down from weekly forward sales of 158,400 RB a year ago. Forward 
commitments, however, still were up 1.568 million RB or 47% from last year. 
Bookings were 36% of USDA's 2022-23 export projection.

   Outstanding all-cotton 2021-22 sales (2.555 million RB) plus the 2022-23 
commitments totaled 7.452 million RB, up 2.658 million RB or 55% from 
comparable numbers a year ago.

   All-cotton shipments of 282,300 RB, up from 238,300 RB a year ago, brought 
shipments for the season to 13.513 million RB, down 2.072 million RB or 13% 
from a year ago. Shipments were roughly 795,000 RB shy of the USDA estimate. 
Census Bureau data also will be considered, in addition to the Foreign 
Agricultural Service weekly data, when USDA makes its final estimate on 2021-22 

   On the U.S. crop scene, cotton conditions improved during the week ended 
Sunday, with good to excellent up four points to 38%, poor to very poor down 
two points to 28% and fair down two points to 34%, USDA reported. By 
comparison, year-ago conditions were 60% G/E, 32% fair and 8% P/VP.

   Squaring in the 15 reporting states advanced nine points to 89%, up eight 
points from last year and two points from the five-year average. Boll setting 
moved up 10 points to 58%, 10 points ahead of last year and eight points above 
the average.

   In widely watched Texas, G/E rose eight points to 25%, fair declined four 
points to 39% and P/VP dropped four points to 36%. Squaring increased 11 points 
to 86%, up 10 points from last year and two points above average. Boll setting 
rose six points to 51%, up 12 points from a year ago and the average.

   Classing of new-crop cotton from South Texas totaled 7,206 bales for the 
reporting week. Tenderable cotton made up 97.2%, a USDA recap showed. An 
additional 24,256 bales were classed during the next five work days.

   Harvesting and ginning expanded in the Rio Grande Valley and Coastal Bend 
and has begun in the Upper Coast where excessive heat pushed the crop to 
maturity. Hot, droughty conditions persisted in the Blackland Prairies. 
Irrigated cotton was drought-stressed in the southern BP. Stands were done in 
the northern BP and bolls had begun to open.

   The recap showed predominant color 21 at 55.2%, leaf 2 at 62.4%, mike 
average at 4.16%, staple average at 35.24 and strength average at 31.10%.

   On the High Plains, stands continued to fail as crop insurance claims 
mounted because of intense drought, though isolated areas in the north got up 
to 6 inches of rain. A lot of land has been plowed. Abandonment may have played 
a role in the improved ratings on the standing cotton. Pivots struggled at 
capacity to deliver enough water to ease stress.

   Praying for rain, some producers have shut off irrigation wells owing to 
high costs, the inability to adequately meet ongoing crop water requirements 
and to conserve water for next year. Cotton on underground irrigation drip 
systems has fared best.

   Some industry estimates have projected abandonment in the High Plains at a 
tentative 50%, possibly more. The Texas crop is seen at a provisional 4.5 
million bales, possibly less.   

   On the money-flow front, the speculative community shaved their net longs in 
cotton futures-options combined by only 451 lots to 81,629 during the week 
ended July 26, according to the latest trader-commitments data reported by the 
Commodity Futures Trading Commission.

   Trend-following hedge funds sold a net 540 lots, adding 797 shorts and 257 
longs to cut their net longs to 10,103, while small spec traders sold a net 630 
lots, adding 1,081 shorts and 453 longs to trim theirs to 2,004. Index funds 
bought a net 716 lots to nudge their net longs up to 69,522.

   On the other side, commercials added 5,456 longs and 5,005 shorts to drop 
their net shorts by 1.4 percentage points to 31.3% of the rising open interest.

   Prices during the reporting week traded on light volume across a 540-point 
range from 89.50 to 94.90 cents, basis December. Combined open interest 
increased 9,371 lots to a delta-adjusted 260,143.

   Meanwhile, unpriced mill on-call sales in the December 2022 through July 
2023 contracts increased 1,515 lots to 88,989 last week, CFTC data showed after 
the close Thursday. Unfixed producer purchases declined 105 lots to 25,866.

   This widened the net call difference 1,620 lots to 63,123, 37.6% of the 
futures open interest. The unpriced mill sales, which have offered scale-down 
market support, outweighed the unfixed producer purchases by a ratio of 3.4:1.

   On the international scene, Cotton Outlook's global July supply-demand 
estimates showed significant changes, converted here to 480-pound statistical 
bales from metric tons. For 2021-22, downward adjustments to the consumption 
estimates for Vietnam and, in particular China, resulted in a reduction of 
2.985 million bales in the world mill use forecast.

   As a result, the balance sheet now indicates a surplus of production over 
consumption of 1.575 million bales, compared with a fall in world stocks of 
1.309 million bales that had been foreseen a month earlier.

   For 2022-23, the production forecast has fallen owing to cuts in the United 
States, reflecting the adverse weather in Texas, and Brazil, where the market 
collapse combined with rising production costs may result in a lower area 
devoted to the next crop (planted either side of the year-end).

   Cotton Outlook thus slashed the projected 2022-23 excess of output over 
consumption to 2.939 million bales from 5.12 million bales.

   The updated estimates put world production at 115.19 million bales for 
2021-22 and 117.85 million bales for 2022-23, with consumption at 113.61 
million bales and 114.91 million bales, respectively. The USDA will issue its 
updated estimates next Friday.


   The USDA's July estimates had world production at 116.22 million bales in 
2021-22 and 120.07 million bales in 2022-23, with mill use at 119.79 million 
bales and 119.92 million bales, respectively.

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