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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.

Duane Howell
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 
late Thursday.

   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 
at 428.

   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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