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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 
Indonesia. 

   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 
stocks. 

   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%. 


(KR)

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