Weekly Cotton Comments 11/17 05:09
Cotton Recaptures Some of Its Massive Losses
Weekly export sales remained strong but shipments continued to lag the pace
needed to make the estimate. Commitments 17% below last year. U.S. crop 67%
harvested and a third classed. Hedge funds reversed to net short for the first
time since July. Unfixed mill December-July on-call sales fell 3,665 lots.
DTN Contributing Cotton Analyst
Cotton futures closed on the plus side for the marketing week ended
Thursday, with most-active March up 167 points or 2.11% to 80.88 cents as the
market recaptured some of its massive recent losses.
March traded within a 390-point range from 81.82 last Friday, shy of
short-term technical resistance at 82.30, to 78.02 on Tuesday, remaining in a
short-term downtrend. March had become the lead contract in terms of open
interest as of Nov. 8 ahead of December options expiration last Friday.
With first notice day looming next Friday, December gained 216 points or
2.82% to close at 78.68 cents. Trading limits will be removed on notice day and
traders not wanting to risk having to take or make delivery will have closed
their positions. Last trading day is Dec. 6.
The March-May switch gained 17 points to settle at 75 points of carry, while
May-July narrowed 26 points to close at 44 points July/over. The inverted
July-December intercrop straddle widened 14 points to 405.Volume declined to an
estimated average of 61,518 lots per session from 76,903 lots the prior week.
The Goldman Sachs index fund roll of longs from December, which had spurred
heavy trading and spread activity, concluded on Monday.
Open interest fell 23,559 lots to 206,548, with December down 50,293 lots to
21,606, March up 19,560 lots to 98,326, May up 2,664 lots to 38,470, July up
2,450 lots to 24,902 and December 2024 up 2,009 lots to 22,412. Certified
stocks grew 2,773 bales to 86,425.
Cash on-call sales jumped to 13,501 bales on The Seam from 1,664 bales the
prior week. The sales were the largest since late September. Prices surged 842
points to average 76.13 cents, reflecting a 243-point gain to 21.60 cents over
loan redemption values. Grower-to-business sales were 12,219 bales and
business-to-business sales were 1,282 bales.
Spot quotes reported by USDA on the base U.S. quality in the regional
markets moved to March futures at 300 points off in the Southeast, 350 off in
both the North and South Delta 525 off in East Texas-South Texas, 475 off in
West Texas 825 off in the Desert Southwest and 875 off in the San Joaquin
Valley. The national average basis was 518 points off.
On the competitive front, the average of the five lowest-priced world
growths for the Far East dropped 39 points to 88.50 cents, while the
lowest-priced U.S. growth landed there was unchanged at 90.10 cents. The U.S.
premium thus widened 39 points to 1.60 cents.
Coming into Thursday, the Cotlook A Index of world values gained 175 points
to 91.05 cents, widening the international basis seven points to 9.90 cents
over the prior-day March futures close. China sold out its offerings on the
final day of its State Reserve sales, Cotlook reported.
On the demand front, net U.S. all-cotton sales for this season and next fell
to a still-strong 372,600 running bales for the week ended Nov. 9 from 460,000
RB the prior week, which were the second highest of this crop year, and were up
from only 33,500 RB last year, USDA reported. Current-crop sales of 342,200 RB
were down from 415,500 RB the week before but up from 25,400 RB last year;
new-crop sales of 30,400 RB -- all upland -- were down from 44,500 RB but up
from 8,100 RB, respectively.
Net upland sales of 328,300 RB for 2023-24, down 17% from the prior week but
up 18% from the four-week average, went to 18 countries, led by China (176,200
RB), Mexico (35,000 RB) and Vietnam (32,600 RB). There were 3,000 RB of
cancellations. Upland sales for 2024-25 were for five countries, topped by
Mexico (11,200 RB) and Guatemala (7,100 RB).
All-cotton 2023-24 commitments reached 8.906 million RB, narrowing the gap
behind a year ago to 1.481 million RB or to 17% and were 63% of the USDA export
forecast, compared with 72% of final exports at the corresponding period in
2022-23. For 2024-25, all-cotton bookings were 576,900 RB, down from 1.122
million RB in forward sales a year ago.
China, this season's top buying destination with 37% of the 2023-24 export
commitments, hasn't booked any U.S. cotton thus far for 2024-25.
All-cotton shipments of 117,400 RB were up from a marketing year low of
94,600 RB the previous week but down from 183,800 RB last year. Upland
shipments of 112,900 RB, up 25% from the week before and 5% from the four-week
average, went to 18 countries, led by China (24,900 RB), Vietnam (20,800 RB)
and Pakistan (17,600 RB).
The margin by which shipments lag prior-year exports widened to 773,400 RB
or 26%. Shipments were 19% of the export forecast, compared with 24% of final
2022-23 exports at this point a year ago.
To achieve the export forecast, shipments need to average roughly 260,160 RB
per week over the 37 weeks left in the marketing year.
On the crop scene, U.S. cotton harvesting advanced 10 percentage points to
67% completed during the week ended Nov. 13, three points behind last year and
four points below the five-year average, USDA reported.
Progress ranged from 57% to 79% done in the Southeast, 86% to 100% in the
Mid-South, 56% to 65% in the Southwest and 51% to 55% in the West. At 56%, the
Texas harvest was four points behind last year but a point ahead of the average.
U.S. upland classing at a season high of 996,386 RB for the week ended Nov.
9 brought the season total to 4.389 million RB, narrowing the narrowing the
margin to 14% below the year-ago classing of 5.128 million RB. Tenderable
cotton totaled 79.2% for the season down from 82.9% last year.
Classing of 17,625 RB of Pima brought the extra-long staple count for the
season to 32,359 RB and the all-cotton total to 4.421 million RB, some 805,000
RB or 15% behind last year. The total was roughly a third of the November
all-cotton production estimate converted to running bales.
On the money-flow front, hedge funds reversed to net short in cotton
futures-options combined during the week ended Nov. 7, according to the latest
weekly supplementary traders-commitments data reported by the Commodity Futures
This was their first net short position since last July. They brought 12,824
lots, adding 7,319 shorts and liquidating 5,505 longs to reverse to net short
5,268 lots from net long 7,556 lots. Index funds sold a net 2,901 lots to drop
their net longs to 55,397, while non-reportable traders -- mostly speculators
-- sold 1,707 lots to chop theirs to a mere 199.
Commercials sold a net 17,432 lots, covering 16,154 shorts and adding 1,278
longs to cut their net shorts to 50,328. They were net short 17.8% of the
combined open interest, down from 23.8%.
Prices during the reporting week spanned a 513-point trading range from
81.38 to 76.25 cents. Combined open interest declined 743 lots to a
Disaggregated data showed managed-money traders sold 16,392 lots, lowering
their net longs to 8,665. Their longs outnumbered their shorts by a ratio of
1.32:1, down from 2.7:1. The end of the reporting period coincided with the
onset of the Goldman Sachs index fund roll of longs from December and heavy
spread activity. The roll ended Monday.
Meanwhile, mills reduced their unfixed on-call sales in the December 2023
through July 2024 contracts by 3,665 lots to 65,520 last week, according to
call data reported by the CFTC after the close Thursday. Producers cut their
unfixed purchases by 1,190 lots to 31,194.
The net call difference fell to 31,194 lots, 17.8% of the December-July
futures open interest. The unpriced mill sales outweighed the unfixed producer
purchases by 2.1:1, not counting any options hedges, which as noted now have
expired in December. In March, the ratio was 2.78:1, but in soon-to-mature
December the unfixed producer purchases outweighed the unfixed mill sales
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