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Weekly Cotton Comments                 05/24 05:32

   Cotton Finishes Marketing Week Mixed

   Spot July posted only gain. Weekly export sales surged. Cotton Council 
conveyed appreciation for trade aid. U.S. cotton 44% planted, nearly even with 
the five-year average. Delta progress still lagged. Southwest plantings 
estimated at 61% of the upland acreage. Massive fund selling preceded strong 
export sales. Mills priced 7,542 lots in July.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures finished mixed, with spot July bouncing off a triple bottom 
to post the only marketing week gain amid actively traded contract months as 
U.S. weekly export sales surged. 

   July gained 68 points to close the week ended Thursday at 67.48 cents, in 
the upper third of its 239-point range from 65.85 to 68.24. It closed back 
above its nine-day moving average, having settled above that MA for the third 
time in four sessions and contributing to short-term basing action following 
the April-May collapse and to talk that a close above 68.24 might find 
follow-through momentum. But a move though last Friday's 65.83 low could signal 
a test of the contract low. 

   December dropped a modest 26 points to settle at 66.83 cents, in the middle 
of its 194-point range from 67.79 to 65.85 cents. The July-December straddle 
traded out to an inverted 75 points, widest since May 7, and settled at 65 
points, up 36 points from a week ago. March lost 59 points to close at 67.56 
cents. 

   Fears that a spiraling trade U.S.-China trade war would stunt world economic 
growth slammed U.S. stock indexes, contributed to the year's biggest selloff in 
oil futures and capped triple-digit day gains in cotton futures Thursday. Some 
cotton traders left their desks early prior to the Memorial Day holiday on 
Monday. 

   Cash online sales increased to 13,311 bales from 1,667 bales on The Seam.  
Prices rose to an average of 56.24 cents per pound from 49.03 cents, with daily 
averages ranging from 59.94 to 54.24 cents. Loan redemption rates averaged 
47.51 cents, up from 37.32 cents, on daily averages from 51.30 to 46.21 cents. 

   World 2018-19 cotton prices as measured by the Cotlook A Index gained 90 
points for the week to 77.75 cents as of Thursday morning, while the 2019-20 
Forward A Index lost 65 points to 76.40 cents. Current-crop prices thus moved 
to 135 points over new-crop quotes from 20 points under. 

   Net U.S. 2018-19 all-cotton export sales jumped to 379,300 running bales 
during the week ended May 16. Those were the largest since 1.019 million RB 
reported as of Feb. 14 for a five-week span when weekly figures were 
unavailable because of a partial federal government shutdown. 

   Upland net sales of 381,400 RB were the largest of the crop year -- aside 
from the period of missing data -- and were for the week in which prices traded 
to new contract lows. The upland sales, up 68% from the previous week and 80% 
from the four-week average, went to 17 countries, led by India, Turkey, 
Bangladesh and Vietnam. China canceled a net 25,100 RB.  Pima commitments fell 
2,100 RB as cancellations exceeded sales. 

   Commitments of upland-Pima combined of 15.329 million RB -- outstanding 
sales of 5.272 million RB plus shipments -- narrowed the gap behind total 
year-ago sales by 328,000 RB to 1.501 million RB or to 8.9% and were 107% of 
the USDA export forecast. Last year, commitments were 109% of final exports. 
The five-year average for upland is 101%. 

   Net 2019-20 all-cotton sales of 246,000 RB brought cumulative sales for both 
crop years to 625,300 RB, up 423,500 RB from a year ago. New-crop bookings of 
3.552 million RB were 20% of USDA's 2019-20 export projection.  At the 
corresponding point last year, forward sales of 4.294 million RB were 29% of 
the current 2018-19 export estimate. 

   All-cotton shipments of 361,600 RB, down from 385,700 the week before and 
420,800 RB last year, boosted the total for the season to 10.058 million RB, 
still 13% behind year-ago exports. Shipments stand at 70% of USDA's 2018-19 
forecast. Last year, exports were 75% of final 2017-18 exports. To achieve the 
estimate, shipments need to average roughly 425,000 RB a week over the 10 weeks 
remaining in the marketing year. 

   Upland shipments of 348,600 RB, down 4% from the prior week but up 3% from 
the four-week average, went to 23 countries. Leading destinations were Vietnam, 
Pakistan, Turkey, China and India. Pima exports of 13,000 RB fell 43% from the 
prior week and 15% from the four-week average. 

   On the Washington scene, the National Cotton Council conveyed its 
appreciation to the Trump administration for instituting a second round of 
trade mitigation payments for U.S. farmers. 

   Chairman Mike Tate, an Alabama cotton producer, said this round of 
assistance, like the first one initiated in 2018, will help partially mitigate 
the impacts of retaliatory tariffs placed on U.S. raw cotton to China. The 
program also continues the provision of funds for export promotion needed to 
expand U.S. cotton markets. 

   Tate, who participated in Thursday's announcement event, noted that the 
second round of aid is timely in that many producers across the Cotton Belt are 
still feeling the impact of severe weather adversities in 2018. President Trump 
held an afternoon press conference with farmers at the White House to announce 
the aid and reiterate that he has farmers' backs. 

   "While our industry is very thankful for this assistance, we strongly 
encourage the administration to engage in constructive dialogue with China to 
address unfair trade practices and barriers," Tate said in a statement.  "China 
traditionally has been U.S. cotton's top export destination.  Resolution of the 
current trade tensions remains our top priority." 

   The NCC, representing the industry's seven segments, had written to 
Secretary of Agriculture Sonny Perdue to urge several modifications designed to 
enhance effectiveness of the trade assistance package. 

   The council also had urged USDA to assist participants in the cotton 
merchandising and distribution channels to offset higher costs associated with 
shipping cotton to alternative markets and to recognize significant impacts on 
the cottonseed segment and its product markets. 

   "The economic impacts extend beyond the farm gate and we will continue to 
work with the administration to find avenues for further assistance," Tate 
said. 

   In its announcement, USDA said Trump had authorized up to $16 billion in 
programs, which it added is "in line with the estimated impacts of unjustified 
retaliatory tariffs on U.S. agricultural goods and other trade disruptions." 
These programs, USDA said, will assist agricultural producers while Trump works 
on long-standing market access barriers. 

   The trade-aid package won't distort planting decisions, USDA officials said, 
but Chris Clayton, DTN ag policy editor, noted in a report that farmers will 
have to plant a crop this spring to be eligible for payments. The program will 
provide up to $14.5 billion in direct payments to farmers. 

   On the U.S. crop scene, planting progress advanced 18 percentage points -- 
fastest pace of the season -- during the week ended May 19 to reach 44% 
completed, six points behind last year and only a point behind the five-year 
average, according to USDA's weekly report. 

   Rapid progress in the High Plains, where 60% of the Texas cotton is planted, 
helped to spur a 20-point jump to 39% seeded in the Lone Star state, two points 
behind last year but up five points from the five-year average. Replanting 
because of hail and wind damage will be required in some areas. Elsewhere in 
the Southwest, the crop was 10% planted in Oklahoma and 18% in Kansas, down 19 
points, and up four points, respectively, from the five-year averages. 

   Planters also rolled at a strong pace in the Southeast, pushing progress up 
19 points to 61% completed in Georgia and up 23 points to 72% done in Alabama, 
10 points and 12 points, respectively, above their five-year averages. Progress 
lagged the five-year averages by two points at 52% in North Carolina and 56% in 
Virginia and stood five points ahead at 65% in South Carolina. 

   However, the soggy Delta was another story. Progress there lagged their 
five-year averages by 33 points at 50% planted in Arkansas, 17 points at 66% in 
Louisiana, 35 points at 34% in Mississippi, 43 points at 34% also in Missouri 
and 10 points at 50% in Tennessee. 

   The West leads the nation on completion rates of 95% in California and 90% 
in Arizona, eight points ahead and two points behind their five-year averages, 
respectively. 

   Based on the March prospective plantings data, which USDA used in its 
initial projection of the 2019 crop this month, the Southwest upland acreage is 
estimated at 8.2 million, down from 8.7 million last year but the second 
highest since 1980. The Southwest is forecast to account for 61% of the total 
upland area, similar to the five-year average. 

   Cotton plantings in the Southeast are projected at 2.8 million acres, 75,000 
acres below last year's acreage but still one of the region's largest of the 
decade. The Southeast again is expected to account for 21% of the total upland 
plantings, slightly below the five-year average. 

   Delta growers are forecast to boost their cotton acreage by 14% to nearly 
2.3 million acres, compared with the five-year average of 1.6 million acres.  
With the largest area since 2011, the Delta's share of total upland area is 
projected to rise to about 17%. 

   By contrast, upland area in the West is forecast to decline 7% to 265,000 
acres, the smallest in three years but above the five-year average. The West 
again would account for 2% of the nation's upland area. However, extra-long 
staple acreage is concentrated in the West, where nearly 95% of the 
255,000-acre total is expected to be planted, with California accounting for 
225,000 acres. 

   Meanwhile, massive fund selling pounded cotton futures to new contract lows 
for the week ended May 14, the session that also produced a key price reversal, 
the Commodity Futures Trading Commission's latest trader-commitments report 
showed. 

   Trend-following funds sold 33,297 lots to reverse to net short 25,936 lots 
from net long 7,361 lots in futures-options combined, according to supplemental 
CFTC data, while managed-money traders sold 19,987 lots to boost their net 
shorts to 24,828 lots. Index funds shaved their net longs 678 lots to 68,501. 
And non-reportable traders increased their net shorts 991 lots to 2,092. 

   Commercials bought 34,966 lots, covering 21,000 shorts and adding 13,966 
longs to drop their net short position to 40,471 lots. Prices ranged from 73.69 
to 64.50 cents, basis spot July, and rallied off the contract low to close on a 
triple-digit gain. Open interest expanded 10,008 lots to 277,172. 

   After the close Thursday, CFTC on-call data showed mills priced 7,542 lots 
in July to cut their unpriced sales in the spot contract to 12,509 lots last 
week. Producers priced 42 lots to drop their unfixed sales to 6,810 lots. This 
resulted in the net call difference falling 7,500 lots to 5,699, 5.5% of the 
July OI, down from 12.7%. Unpriced mill sales accounted for 12.1% of the OI, 
down from 19.3%, and outweighed the unfixed producer position by 1.84:1, down 
from 2.93:1. 

   By comparison, mills a year ago had an unpriced 46,553 lots in the July 2018 
contract and the net call difference was 41,777 lots, 32.3% of the OI. The 
unpriced mill sales were 36% of the OI and topped the unfixed producer position 
by 9.7:1. 

   Across the board last week, mills priced a total of 8,132 lots, reducing 
their unpriced sales to 89,640 lots, 41.1% of the declining OI. A year ago, 
unpriced mill sales were a new record high of 164,837 lots, eclipsing the prior 
mark of 163,680 lots established on May 4, 2018. 


(KR)

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