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Weekly Cotton Comments 12/08 05:04
Cotton Jumps 3.1% As Cert Stacks Plunge
Export sales fell and shipments continued lagging the pace to make the
November estimate. Aussies reported to have cut their crop estimate 26%. U.S.
cotton crop estimate 63% classed, including 58% of the Texas upland forecast.
Hedge funds trimmed net shorts; managed-money traders reversed to net long.
Unpriced March on-call mill sales rose 822 lots.
Duane Howell
DTN Contributing Cotton Analyst
Cotton futures shot up the 300-point daily limit in spot March and finished
up 253 points or 3.06% to 82.59 cents for the marketing week ended Thursday as
certificated stocks plunged ahead of the USDA monthly supply-demand forecasts
later Friday.
March took out key technical resistance at 82.30 and closed on its highest
finish since Oct. 31 amid trader positioning ahead of the supply-demand update,
which on average was expected to show only small changes.
Cert stocks fell 81,643 bales or 93% to 6,126, with the bulk of the
withdrawals -- 67,924 bales -- coming at Galveston and the others at
Dallas/Fort Worth and Houston. The withdrawals are rumored headed for export.
An international cotton merchant stopped deliveries on December, which expired
Wednesday at 78.75 cents, 100 points below March.
The March-May switch narrowed 16 ticks to settle at 48 points of carry and
May-July tightened 36 points to 22 July/over, while the inverted July-December
intercrop straddle widened 44 points to close at 409. December 2024 gained 157
points to settle at 79.20 cents.
"The fact that the market is below its 55-week moving average and 55-day MA
make me hesitant to embrace a bullish bias just yet," a veteran Lubbock trader
commented.
Volume averaged an estimated 33,773 lots per session, bolstered by 67,387
lots on Thursday when the turnover topped the average of the prior four days of
25,371 lots and the 23,129 lots of last week (corrected). Open interest coming
into the day had grown 3,537 lots on the week to 197,083, with March up 1,112
lots to 105,277, May up 1,155 lots to 40,450 and July up 1,073 lots to 27,377.
Cash online cotton sales leaped to 66,933 bales on The Seam, up from 26,887
bales the prior week. Sales were the largest since late January 2022. Prices
edged up 21 points to average 75.69 cents for the week, reflecting a 39-point
gain to 22.02 cents in premiums over loan redemption rates. Grower-to-business
sales jumped to 63,351 bales and business-to-business sales fell to 3,528 bales.
Spot quotes on the base U.S. quality in the seven regional markets narrowed
75 points to 175 points off spot March in the Southeast, 50 points to 250 off
in the North and South Delta, 50 points off to 425 in West Texas 50 off to 575
in the Desert Southwest and to 550 off in the San Joaquin Valley. The East
Texas-South Texas basis stayed at 525 points off. The national average daily
basis narrowed 46 points to end at 295 off at 78.66 cents.
On the competitive front, the weekly average of the five lowest-priced world
growths for the Far East fell 55 points to 87.90 cents, while the lowest-priced
U.S. growth of comparable quality landed there fell 25 points to 89.80 cents.
The U.S. premium thus widened 30 points. The fine count adjustment for
2023-crop cotton ticked down to 63 points. The adjusted world price dropped to
63.63 cents.
Coming into Thursday, the Cotlook A Index of world values had gained 25
points from a week ago to 89.95 cents, widening the international basis 10
ticks to 10.20 cents over the prior-day March futures settlement.
On the demand front, net U.S. all-cotton export sales for this season and
next slumped to a combined 149,200 running bales for the week ended Nov. 30
from 234,700 RB the prior week but were up from a mere 60,200 RB last year,
USDA's weekly report showed. Current-crop sales fell to 119,600 RB from 219,300
RB the prior week but were up from 34,000 RB last year, while new-crop sales
edged up to 29,600 RB from 15,400 RB and 26,600 RB, respectively.
Net upland sales of 119,600 RB for 2023-24, down 47% from the prior week and
63% from the four-week average, went to 15 countries, led by China (59,100 RB),
Macau (17,900 RB) and Bangladesh (16,900 RB). Cancellations were 41,900 RB. Net
sales of 29,600 RB -- all upland -- for 2024-25 included 13,200 RB for Turkey,
which canceled 15,000 RB for 2023-24, and 8,100 RB for Guatemala.
All-cotton shipments rose to 143,200 RB from 97,700 RB the week before but
were down from 148,000 a year ago. Upland shipments of 139,200 RB, up 57% from
the previous week and 50% from the four-week average, went to 19 countries,
headed by China (60,500 RB), Bangladesh (14,300 RB) and Vietnam (9,800 RB).
Combined shipments of upland and Pima reached 2.53 million RB, down some
887,000 RB or 26% from a year ago, and were 21% of the USDA November forecast,
compared with 28% of final 2022-23 exports at the corresponding point last
season. To achieve the November export estimate, shipments need to average
roughly 273,600 RB per week over the 34 weeks remaining in the marketing year.
Meanwhile, the Australian agricultural statistics agency, ABARES, is
reported to have projected a 26% reduction to the equivalent of 4.248 million
bales in cotton production for the summer months from last season. Australia is
a major cotton exporter. The USDA last month forecast Aussie 2023-24 production
at 5.1 million bales and exports at 5.7 million, down 12% and 8%, respectively,
from last season.
Trade expectations for the U.S. supply-demand reports showed production down
a mere 10,000 bales from the November forecast to 13.08 million. Exports are
expected down 100,000 bales to 12.1 million and ending stocks up 60,000 bales
to 3.26 million. Globally, production is expected down 30,000 bales to 113.43
million and ending stocks down 10,000 bales to 81.49 million.
On the U.S. crop scene, upland classing increased to 1.171 million RB on
samples from 355 gins during the week ended Nov. 30 to bring the season total
to 7.812 million RB, down 607,932 RB or 7% from a year ago, according to the
latest USDA weekly recap.
Tenderable cotton accounted for 79.8%, down from 83.7% last year. Classing
of Pima or extra-long staple cotton of 132,509 RB brought the ELS count for the
season to 132,509 RB, down from 203,046 a year ago, and the all-cotton tally to
7.925 RB, down 679,069 RB or 8% from last year.
Converting USDA's November estimates in statistical 480-pound bales to
running bales, approximately 62% of the upland crop projection and 63% of the
all-cotton production forecast have been classed. Upland classing in Texas of
279,365 RB hiked the season total to 2.209 million RB, about 58% of the
November forecast.
In the Texas Plains, which accounted for most of the Lone Star State's
upland crop still to be classed (misstated here last week), the Lubbock and
Lamesa facilities on the High Plains had graded 810,379 RB and 134,105 RB,
respectively, 65% and 38% of their respective estimates. Most of the Rolling
Plains crop goes to Abilene for classing, which also gets cotton from elsewhere
in Texas and from Oklahoma and Kansas.
Inclement weather interfered intermittently with harvesting in the West
Texas Plains, but producers made progress ahead of a second cold front that
arrived late in the period with an estimated 20% still on the stalk. Ginning
advanced, and some expected to be done in one to three weeks.
Harvesting has been completed throughout the Delta where roughly a third of
the gins in the Dumas area have completed annual pressing operations and others
hoped to finish by the end of December. Larger gins will work well into next
year. Most gins in the Rayville classing area in the South Delta also have
finished for the season and others expected to be through soon.
On the money-flow front, hedge funds bought a net 593 lots to pare their net
shorts to 8,533 during the week spanning the Thanksgiving holiday ended Nov.
28, according to the latest supplemental traders-commitments report from the
Commodity Futures Trading Commission. They added 928 longs and 335 shorts.
Index funds sold a net 1,905 lots to reduce their net longs to 55,060, while
non-reportable traders -- mostly speculators -- sold 655 lots to increase their
net shorts to 1,528. Commercials bought a net 1,968 lots to cut their net
shorts to 44,998 on the covering of 4,611 shorts and the addition of 2,645
longs.
Prices for the reporting week traded within a 225-point range from 81.11 to
78.86 cents. Combined open interest declined 1,941 lots to a delta-adjusted
218,833.
Separate disaggregate data showed managed money funds bought 1,232 lots to
reverse to net long 695 lots from net short 537 lots. They added 900 longs and
covered 332 shorts.
After the close Thursday, CFTC on-call data showed unpriced mill sales based
in March increased 822 lots last week to 30,711, while unfixed producer
purchases rose by 2,336 lots to 21.538. The net call difference narrowed to
9,137 lots, 8.66% of the futures OI, down from 10.23%. The unpriced mill sales
outweighed the unfixed producer purchases 1.43:1, not counting any options
offsets.
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