Weekly Cotton Comments 09/29 05:19
Cotton Rallies to Near September High
Talk of lower U.S. crop forecast again weighed against ongoing demand woes.
Upland current-crop export sales fell to a five-week low; shipments continued
to lag. U.S. boll opening reached 65%; 13% harvested. Classing down 7% from
last year. Texas crop still 90% poor/very poor. Selling by hedge funds and
specs countered by index fund buying. Unpriced December-July mill on-call sales
increased 4,235 lots.
DTN Contributing Cotton Analyst
Cotton futures rallied off the lowest intraday print since Sept. 8 to finish
the marketing week ended Thursday up 224 points or 1.59% to 88.71 cents in
benchmark December, its highest settlement since Sept. 5.
December, posting five consecutive higher highs, closed a few ticks below
the upper quarter of the September trading range from 90 cents to 85.16 cents.
It settled in the upper third of the MW range from 85.55 last Friday to 89.89
cents on Thursday. With one trading day left in September, December has gained
89 points or 1.01% for the month.
Traders again weighed expectations in some quarters for a lower U.S. crop
estimate in the October supply-demand report against ongoing demand woes.
December made four straight higher lows amid end-of-month positioning.
The December-March switch narrowed 26 points to settle at 54 points
March/over, while March-May narrowed 35 points to close at 28-points May/over
and the inverted May-July spread widened 33 points to settle at 54 points
May/over. December 2024 gained 27 points to finish at 81.69.
Volume increased to an estimated average of 35,424 lots per session from
25,714 lots the previous week. Open interest rose 5,356 lots to 240,323, with
December up 1,455 lots to 126,532, March up 1,001 lots to 58,429, May up 1,868
lots to 24,826 and July up 120 lots to 11,486. Cert stocks grew 14,641 bales to
35,126, with 439 bales awaiting review.
Fifteen delivery notices have been issued on October, 13 of which were
issued by J.P. Morgan Securities and stopped by SG Americas Securities, which
also stopped two notices issued by Term Commodities. Only two lots were open in
October coming into Thursday.
The buildup of certificated stocks is considered generally indicative of the
board offering the best price currently available for certain qualities. That
hues with poor demand, as exemplified by weak export sales.
Cash online sales quickened to 14,993 bales from 1,572 bales on The Seam.
This was the largest turnover since the week ended Aug. 31. Prices jumped 343
points to average 81.29 cents, reflecting a 322-point gain to 27.92 cents in
average premiums over loan values. Grower-to-business sales rose to 11,018
bales and business-to-business sales to 3,975 bales.
On the competitive front, the average of the five lowest-priced growths for
the Far East eased down a couple of ticks to 96.54 cents, while the
lowest-priced U.S. growth landed there gained 25 points to 97.50 cents. The
U.S. premium thus widened 27 points to 96. The adjusted world price was little
changed at 72.27 cents.
Coming into Thursday, the Cotlook A Index of world values had gained 20
points to 98.25 cents, narrowing the international basis 16 points to 10.06
cents over the prior-day December futures settlement.
On the demand scene, net U.S. all-cotton export sales for this season and
next came in at 81,900 running bales for the week ended Sept. 21, down from
111,700 RB the previous week and 73,200 RB a year ago, USDA reported.
Current-crop sales were 79,900 RB, down from 106,600 RB the prior week but up
from 31,400 RB last year, while new-crop sales were 11,000 RB, up from 5,100 RB
but down from 41,800 RB, respectively.
Net 2023-24 upland net sales fell to a five-week low to 55,300 RB, down 48%
from the prior week and 31% from the four-week average. Sales went to 19
countries, led by Vietnam (15,700 RB), China (13,100 RB) and Indonesia (5,400
RB). Cancellations were 8,100 RB, including 3,500 RB for Pakistan. Pima sales
hit a crop year high at 15,600 RB. The new-crop sales, all upland, went to
Malaysia (8,800 RB) and Thailand (2,200 RB).
All-cotton 2023-24 commitments of 5.615 million RB lagged 2.508 million RB
or 31% behind cumulative sales a year ago and were 47% of the USDA estimate,
compared with 66% of the estimated final 2022-23 exports at corresponding point
last season. Commitments for 2024-25 of 404,500 RB are down 591,000 RB or 59%
from forward bookings last year.
Combined upland and Pima shipments rose to 161,500 RB from 152,700 RB the
prior week but were down from 189,000 RB a year ago. Upland shipments of
159,400 RB, up 6% from the week before but down 3% from the four-week average,
went to 17 countries, headed by China (73,300 RB), Bangladesh (18,300 RB) and
Pakistan (15,000 RB).
All-cotton shipments for the season of 1.386 million RB are some 454,000 RB
below year-ago exports and amount to about 12% of the USDA forecast, compared
with 15% of final estimated exports at this point last season.
Combined upland and Pima shipments need to average roughly 239,660 RB per
week over the 44 weeks remaining in the marketing year to achieve the USDA
export projection. If the forecast is achieved, exports this season would be
the smallest since 2015-16.
On the U.S. crop scene, boll opening increased 10 points to 65% last week, a
point behind a year ago but three points above the five-year average, USDA
reported. Harvesting advanced four points to 13% done, down a point and even,
respectively. Conditions improved a little, with fair and better up a point to
58%, even with last year.
As a percentage of the crops, boll opening was most advanced in Louisiana at
97%, Arkansas at 95%, Mississippi at 87%, Kansas at 89% and Arizona at 79%.
Compared with their five-year averages, crops were up three points in Louisiana
and Arkansas, six points in Mississippi and a whopping 40 points in Kansas but
lagged 14 points in Arizona.
The Texas crop was 59% open and 24% harvested, four points and three points,
respectively, above average. Conditions remained rated at 90% poor to very
poor. Some crop districts reported hail from scattered storms, including the
northern High Plains. Rainfall ranged from zero to 3 inches with the largest
amounts in the Cross Timbers and Blacklands.
Ginning began winding down in South Texas as gins worked through backlogs of
modules. Harvesting of the short Blacklands dryland crop had been completed and
had begun on irrigated cotton. Stripper harvesting resumed in East Texas after
rain had slowed fieldwork. Application of defoliants began on a small scale in
the High Plains.
U.S. classing of 102,824 RB for the week ended Sept. 22 brought the season
total to 750,911 RB, down 7% from 804,788 RB graded a year ago, USDA's latest
weekly recap showed. Tenderable cotton for the season accounted for 84.1%,
compared with 84.8% last year. Eligible cotton comprised 45.3%, against 69.2%
All but a smattering of the season total came from Texas and Louisiana on
classing of 741,353 RB and 6,279 RB, respectively. The weekly classing in Texas
came from 42 gins, down from 45 for the season.
By midweek, with harvesting expanding under favorable conditions in Texas
and the Delta, classing had climbed to 824,190 RB, including a two-day total on
Sept. 25-26 of 53,593 RB.
On the money-flow front, hedge funds and speculators sold a net 2,350 lots
to reduce their net longs to 41,505 in cotton futures-options during the week
ended Sept. 19, while index funds bought 2,089 lots to raise theirs to 66,598,
according to the latest traders-commitments data reported by the Commodity
Futures Trading Commission.
Hedge funds sold a net 1,786 lots, liquidating 3,877 longs and covering
2,090 shorts to cut their net longs to 32,988 lots. Non-reportable traders --
mostly specs -- sold a net 563 lots, liquidating 933 longs and covering 370
shorts to lower theirs to 8,519 lots. Index funds covered 1,200 shorts and
added 889 longs to boost their perpetually net long position to 66,598 lots.
Commercials bought a net 261 lots, adding 4,475 longs and 4,214 shorts to
nudge their net shorts down to 108,105 lots. This pared their net shorts 1.1
points to 37.3% of the open interest.
December futures during the reporting week traded within a tight 206-point
range from 86.36 to 88.42 cents, and only 138 points separated the high-low
closes from 87.80 to 86.44 cents. Then December settled down 53 points for the
calendar week, finishing precisely even with where it closed on Sept. 8.
Combined open interest increased 7,250 lots to a delta-adjusted 289,398, a new
high since Nov. 8, 2022.
After the close Thursday, CFTC on-call data showed unpriced mill sales in
the 2023-24 December through July contracts increased 4,235 lots to 77,517 last
week. Unfixed producer purchases declined 636 lots to 36,791, resulting in the
net call difference widening 4,871 lots to 40,726, 18.75% of the
December-January futures OI. The unpriced mill sales outweighed the unfixed
producer purchases by 2.1:1, not counting any options offsets.
Unpriced mill on-call sales in December edged up 25 lots to 41,723 and
unfixed producer call purchases fell 657 lots to 32,583, widening the net call
difference 682 lots to 9,140. The ratio of unpriced mill sales to unfixed
producer purchases was 1.25:1, little changed from a corrected 1.28:1 the prior
week, again not counting any options hedges.
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