Weekly Cotton Comments 02/14 04:59
Cotton Mixed As Virus Spike Clouds Demand Outlook
Spread volume heavy. Weekly export sales hit new high; cancellations jumped.
U.S. supply-demand estimates flat; price forecast cut. Ginning rose 13.7% on
year. World carryout raised 2.5 million bales, mostly on smaller demand, larger
crop. Hedge funds sold 4,725 lots as prices fell to lowest since Dec. 19. Mills
priced or rolled 1,706 March on-call lots.
By Duane Howell
DTN Cotton Correspondent
Cotton futures closed mixed for the marketing week, with spot March showing
the only loss amid demand uncertainties linked to a spike in new coronavirus
cases and another round of heavy fund rolling.
March finished down a slight 16 points to 67.75 cents for the week ended
Thursday, even with last Friday's close. It traded within a 169-point range
from 67.10 cents last Friday to 68.79 cents on Wednesday, highest since Jan.
31. Exercised in conjunction with the expiration of March options last Friday
were 12,431 calls and 6,090 puts.
May inched up 15 points to settle at 68.63 cents, July edged up 19 points to
69.50 cents and December gained 22 points to 69.34 cents. The big Goldman Sachs
index fund roll was scheduled for completion Thursday.
Volume climbed to an average of 66,439 lots per day from 60,009 lots the
prior week. Spreads through Wednesday averaged 49,772 lots per day, topped by
55,403 lots on Friday, 72.6% of the session's 76,295-lot turnover. Open
interest fell 27,128 lots, with March's down 57,392 lots to 36,085, May's up
26,544 lots to 101,686 after it took the lead last Friday, July's down 102 lots
to 40,312 and December's up 2,591 lots to 34,563.
Certified stocks grew 3,842 bales to 32,066, increasing largely on the
addition of cotton at the lower end of the spectrum of tenderable qualities.
First notice day is five trading sessions ahead after today.
Chinese health officials changed their methodology on how they counted
confirmed cases of the coronavirus, resulting in a sharp climb in the number of
cases and deaths. U.S. stock markets weighed broadly bullish sentiment against
rising economic uncertainty due to the virus.
Cash online sales rose to 30,616 bales on The Seam from 20,949 bales.
Prices pushed up 104 points to an average of 60.79 cents per pound, with
average loan redemption rates rising 61 points to 10.03 cents.
Grower-to-business sales were 24,786 bales and business-to-business sales were
5,830 bales. Offerings late the prior business day were 288,665 bales.
Net all-cotton export sales for shipment this season and next totaled a
robust 419,100 running bales during the week ended Feb. 6, up from 342,600 RB
the prior week, with upland net sales of 350,900 RB for 2019-20 hitting a new
crop year high for the second time in three weeks.
While gross current-crop upland sales surged to 502,900 RB, cancellations
jumped to 152,000 RB, including 140,800 RB by China. Still, upland net sales
were up 6% from the previous week and 15% from the prior four-week average.
Sales went to 17 countries, led by Vietnam, Turkey, Pakistan, Bangladesh and
All-cotton 2019-20 commitments reached 13.638 million RB, 85% of the USDA
export estimate. Weekly sales averaging roughly 96,600 RB would match the
export forecast. Net sales of 57,300 RB for next season brought 2020-21
commitments to 1.178 million RB, compared with the last available year-ago
forward bookings of 2.142 million RB reported as of Jan. 2. (A federal
government shutdown halted year-ago sales data for several weeks.)
Combined upland-Pima shipments of 407,900 RB, though down from the prior
week's marketing year high of 424,500 RB, remained on a pace to achieve the
USDA forecast. Upland exports of 400,500 RB, down 4% from the prior week but up
20% from the four-week average, went to 20 countries, led by Pakistan, Vietnam,
Turkey, China and Bangladesh. All-cotton exports stood at 6.08 million RB, 38%
of the estimate.
The USDA left its U.S. supply-demand estimates unchanged from last month but
cut a cent to 62 cents per pound in its forecast of the 2019-20 season average
upland farm price, 8.3 cents lower than in 2018-19.
All-cotton ginned to Feb. 1 totaled 18.935 million RB, up 13.7% from 16.651
million last season, USDA's National Agricultural Statistics Service reported.
Upland ginning reached 18.352 million RB, up 14.8% from 15.981 million last
year, and Pima ginning fell 13% to 582,900 RB.
By regions, upland ginning rose by 39.2% to 5.539 million RB in the
Southeast, with Georgia up 44.4% to 2.706 million; 17.8% to 5.324 million in
the Mid-South, with Mississippi up 12.3% to 1.535 million; 0.08% to 6.693
million in the Southwest, with Texas down 2.2% to 6.297 million; and 4.96% in
the West to 549,000.
Globally, 2019-20 forecasts featured a 2.53-million-bale boost to 82.12
million in ending stocks, driven by an 850,000-bale increase to 121.32 million
in production, a 1.21-million-bale decrease to a three-year low of 119.01
million in consumption and a 460,000-bale hike to 79.99 million in beginning
Projected mill use in China fell a million bales to 37.5 million, attributed
partly to negative economic effects of the coronavirus outbreak more than
offsetting the positive impact of the U.S-China trade agreement. A cut in
China's consumption had been expected because of the virus.
Mill use also declined in Vietnam but rose in Pakistan and Turkey.
Production increased in Pakistan, Brazil and Tanzania in 2019-20 and by 480,000
bales in 2018-19 in Brazil.
The margin by which USDA now expects world production to exceed production,
up 2.06 million bales to 2.32 million, is in line with Cotton Outlook's latest
projection of 2.34 million as of Jan. 31. Cotlook's estimates, converted to
480-pound statistical bales from metric tons, put production at 119.51 million
and consumption at 117.17 million.
Meanwhile, trend-following funds sold 4,725 lots, liquidating 2,563 longs
and adding 2,162 shorts to reduce their net longs to 11,767 lots in cotton
futures-options combined during the week ended Feb. 4, according to the latest
supplemental traders-commitments data.
Index funds sold a net 779 lots to shave their net longs to 80,745, the
Commodity Futures Trading Commission report showed, while non-reportable
traders sold 1,336 lots to cut theirs to 4,037. Commercials bought 6,840 lots,
covering 8,293 shorts and adding 1,453 longs.
Managed-money funds sold 3,105 lots to lower their net longs to 33,435,
liquidating 2,967 longs and adding 138 shorts, disaggregated data showed.
Prices during the reporting week ranged from 70.92 to 66.75 cents, basis
spot March, the lowest intraday price since Dec. 19. Combined open interest
fell 22,559 lots to a delta-adjusted 292,759. That was the largest OI decline
in these weekly reports since Nov. 12, 2019 when spot December traded from
63.45 to 65.06 cents.
Separately, mills priced or rolled 1,706 on-call lots in March during the
week ended last Friday, reducing their unpriced sales there to 18,098 lots,
CFTC data showed after the close Thursday.
Producers priced or rolled 4,775 lots to cut their unfixed position to
13,247 lots. The net call difference fell 3,069 lots to 4,851, 6.4% of the
March open interest, with unpriced mill sales accounting for 23.9%.
Mills, which had priced a total of 3,361 lots across the board the week
before, bought a net of only 50 lots last week. Their overall unpriced sales
crawled up to 100,083 lots, 41.7% of the OI, up from 37.4%.
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