Weekly Cotton Comments 06/24 05:01
Cotton Dives 17.22 Cents in Most-Active December
December plunged to lowest close since mid-March. U.S. crop 96% planted; 22%
squaring and 6% setting bolls. Crop ratings deteriorated. Overall spec longs
increased as index traders completed scheduled rolls; combined OI fell to
lowest since early December 2020. Mills' unpriced call sales rose by 2,381 lots
in the December through July 2023 contracts. World cotton trade projected at
the second highest on record.
DTN Contributing Cotton Analyst
Waves of selling amid long liquidation, spurred by growing concerns that
efforts by the Federal Reserve to curb inflation will take a toll on the
economy, pounded cotton futures this holiday-shortened trading week.
Most-active December shed 17.22 cents to close at 102.01 cents for the
marketing week ended Thursday, down 14.44%. Spot July, where first notice day
is today, lost 721 points or 5.02% to settle at 133.32 cents after wild
gyrations in the July-December switch. No July delivery notices were posted
December settled on its lowest finish since mid-March, near the low of the
of the week's 18.29-cent trading range from 119.80 cents last Friday to 101.51
cents on Thursday. July closed below its 40-day moving average, suggesting a
downward slant in the longer-term trend.
The inverted July-December intercrop straddle traded Thursday all the way
from a new high at 38.95 cents to a low of 8 cents and settled at 34.31 cents,
down 94 points for the session and 10.01 cents for the week. July closed down
the expanded 700-point daily limit. July trading limits will be removed during
the its delivery notice period.
October, thinly traded new-crop "bridge," March and May all had closed down
the 600-point daily limit on Wednesday, prompting the expanded limit for
Thursday. The December-March spread narrowed seven points for the week to close
An abrupt jump in certificated stocks reported Thursday may have contributed
to wild swings in the July-December straddle. Cotton in deliverable position
went from only 103 bales on Tuesday to 10,606 as of Wednesday, an increase of
Widespread selling across the entire commodity complex and talk of
cancellations, renegotiations or buybacks of export sales contracts made at
higher prices -- many deliveries are said to be running one, two and even three
months behind schedule -- also may have weighed on cotton prices, some analysts
Tuesday marked the 180-day implementation deadline for the U.S. ban on
imports of goods from China's Xinjiang region, China's top cotton-producing
area. Signed into law by President Biden last December, the legislation bans
products linked to coerced labor from China. The implementation may further
inflame already strained U.S.-China relations.
Volume quickened to an estimated average of 46,010 lots, bolstered by a
heavy 57,999 lots on Thursday and 57,644 lots on Wednesday. The market was
closed Monday in observance of Juneteenth, resulting in the weekly U.S. export
sales-shipments report being delayed until today.
Open interest coming into Thursday, already the lowest last week in 22
months, fell an additional 15,478 lots to 183,753, with July down 15,918 lots
to 5,981, December down 4,343 lots to 122,079, March up 2,687 lots to 26,694
and May up 1,517 lots to 9,107.
No online cash cotton trading took place on The Seam, which has been
inactive since June 15.
On the competitive front, the average of the five lowest-priced world
growths for the Far East fell 452 points to 157.13 cents, while the
lowest-priced U.S. growth landed there dropped 435 points to 158.30 cents. The
adjusted world price fell to 135.95 cents.
Current-crop world values as measured by the Cotlook A Index coming into
Thursday had fallen 480 points from a week earlier to 156.50 cents, narrowing
the international basis by 483 points over the prior-day spot July futures
close. The Forward A Index had declined 630 points to 130.70 cents, widening
the gap below the current-crop index by 150 points to 25.80 cents.
On the U.S. crop scene, cotton planting advanced six percentage points to
reach 96% completed during the week ended Sunday, up a point from a year ago
and the five-year average, USDA's progress report showed.
Planting stood at 95% or more in 14 of the 15 reporting states with Oklahoma
at 78%, up from 73% last year but down from its average of 85%.
Squaring advanced eight points to 22%. Six states -- Alabama at 29%, Arizona
at 58%, Kansas at 13%, Louisiana at 74%, Texas at 23% and Virginia at 35% --
were ahead of their averages. Six percent of the crop was setting bolls, the
season's first boll-set report showed, up two points from last year and the
average, led by Texas at 10% and Arizona at 9%,
Crop ratings declined significantly, with good to excellent down six points
to 40% and poor to very poor up seven points to 26%. These compare with
year-ago conditions at 52% good-excellent and 6% poor-very poor.
With hot, dry, windy conditions prevailing on the Texas High Plains, the
Lone Star State's cotton crop deteriorated, with good-excellent dropping six
points to 19% and poor-very poor rising 11 points to 40%. A year ago, 34% of
the Texas crop was rated good-excellent.
While many cotton plants in the Rio Grande Valley were seen shedding
unwanted squares they won't be carrying to harvest, some impressive boll loads
also were reported. Valley cotton was at peak bloom. Adjusters evaluated fields
in the Upper Coast for insurance claims.
On the Texas Plains, cotton ranged from recently replanted cotyledons to
match-head squares. Most stands have had a rough start. Stands were skippy and
decisions were being made which fields would be failed. Irrigated cotton
northwest of Lubbock was reported being plowed under.
The USDA rated subsoil moisture as short to very short in 96% of the
northern Texas High Plains and 90% very short and 6% short in the southern
district. Statewide, subsoil was 49% very short, 39% short and 12% adequate.
Meanwhile, 2021-crop loans outstanding fell 91,058 RB to 845,050 during the
week ended June 20, USDA reported. The large bulk of the cotton remaining under
loan is believed committed and awaiting shipping orders. Upland cotton under
loan included 862,151 RB of Form G issued to marketing co-ops or loan servicing
agents and 17,559 RB of Form A issued to individual growers.
On the money-flow front, trend-following hedge funds and non-reportable
traders -- mostly small speculators -- sold a net 1,080 lots in cotton
futures-options combined during the week ended June 14, while index funds
bought 6,274 lots. Index traders completed their scheduled rolls forward from
the July contract. July options expired June 10.
The latest traders-commitments data reported by the Commodity Futures
Trading Commission showed the overall net long position of the speculative
community rose by 5,167 lots to 125,622, while the net shorts held by
commercials on the other side jumped 9.1 percentage points to 51.6% of the
combined open interest.
Prices during the reporting week spanned a 1,063-point range from 137.07 to
147.70 cents in July and a 632-point range from 126 to 119.68 cents in
December. Combined open interest fell 39,720 lots to a delta-adjusted 243,439,
smallest in these reports since early December 2020.
After the close Thursday, the CFTC on-call report showed mills added 2,381
lots in the December through July 2023 contracts to raise their unpriced sales
in those deliveries to 91,199, 53.9% of the futures OI. Producers added only 45
lots, nudging their unfixed purchases to 25,959.
The net call difference increased 2,336 lots to 65,240, 38.6% of the OI. The
unpriced mill sales outweighed the unfixed producer purchases by ratios of
3.51:1 in the combined four December-through-July contracts, by 5.5:1 in spot
July with three trading sessions then left until first notice day and 2.9:1 in
Looking back, USDA's June 10 world supply-demand report projected global
cotton trade to rebound to 47.5 million bales in 2022-23, 2.3 million above the
year before and the second highest on record, with the United States and Brazil
the largest exporters.
The USDA expected elevated cotton prices to continue with the global
stocks-to-use ratio remaining at one of the lowest in 10 years at 68.1%. World
ending stocks were projected at 82.8 million bales, the lowest in four years.
World cotton mill use, projected marginally below this season at 121.5
million bales, encountered plenty of skepticism at the time on inflationary
pressures impacting the economy. Global production was forecast to rise nearly
4% from 2021-22 to 121.3 million bales, the result of increased area. Skeptics
question whether that can be achieved in the face of lower yields and higher
A focal point next week will be USDA's report on the U.S. planted acreage.
With planting still in progress at the time of the survey, the cotton area and
the yield will remain tentative. Drought in the Southwest, which accounted for
63% of the U.S. upland planted acreage last year, has generated much concern
about plantings and crop prospects.
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