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Weekly Cotton Comments                 08/07 05:11

   Cotton Hits New Intraday High Since March 5

   Cash online sales surged. New-crop export sales topped expectations; 
shipments neared forecast. U.S. crop ratings declined; early estimates put 
Texas Hannah losses at 175,000 bales. Isaias rains helped some Southeast 
cotton. Hedge funds, specs sold 7,026 lots as prices fell. Mills priced a total 
of 158 lots. Broadened virus relief aid sought.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures extended gains to the highest December intraday print since 
March 5 and highest close since Feb. 26 amid renewed fund-spec buying indicated 
by rising open interest.

   December finished up 167 points or 1.03% to 64.85 cents for the marketing 
week ended Thursday, near the high of its 313-point range from 61.92 last 
Friday to 65.05 cents on Thursday. It has posted seven consecutive higher highs 
and five higher lows in a row, breaking through key resistance at the July high 
of 64.90 and closing just below that.

   The December-March spread widened a single tick to a settlement difference 
of 64 points carry. December 2021 gained 112 points to close at 64.31 cents.

   Outside influences -- U.S. dollar weakness, new rally highs in gold and 
crude oil futures, five straight gains in the Dow Jones Industrial Average and 
the S&P 500 along with a Nasdaq Composite close above 11,000 for the first time 
-- contributed to the cotton advance. Traders looked ahead to the first 
survey-based U.S. production estimates for 2020 on Wednesday by USDA's National 
Agricultural Statistics Service.

   Volume increased to an average of 25,281 lots per session from 20,171 lots 
the previous week.  Open interest grew 12,673 lots to 186,675, with December's 
up 5,703 lots to 119,931, March's up 6,429 lots to 37,062 and May's up 1,070 
lots to 8,002. Cert stocks dropped 745 bales to 6,800.

   Cash online sales surged to 56,370 bales on The Seam, largest since last 
December, ahead of a decline in marketing loan gains. Prices fell 115 points to 
an average of 57.74 cents per pound, with premiums over loan redemption rates 
down 38 points to 8.48 cents. Grower-to-business sales were 53,425 bales and 
business-to-business sales were 2,945 bales.

   Competitive-price relationships featured gains of 373 points to 68.69 cents 
in the average of the five lowest-priced world growths for the Far East and 260 
points to 72.20 cents in the lowest-priced U.S. cotton landed there. The U.S. 
premium thus narrowed 113 points to 3.51 cents.

   With transportation-quality differentials raised 200 points to 19.25 cents 
to reflect increased transportation costs, the adjusted world price rose 173 
points to 49.44 cents, resulting in the marketing loan gain declining to 2.56 
cents for the MW through Thursday.

   On the demand front, net U.S. all-cotton new-crop export sales topped trade 
expectations, coming in at 144,100 running bales during the week ended July 30, 
up from a mere 10,000 the prior week. Shipments remained strong, almost 
achieving the estimate with one shipping day left.

   Upland net sales of 130,800 RB for 2020-21, largest since the week ended 
June 25, went to 17 countries, headed by China (46,900 RB), Vietnam, Indonesia, 
Bangladesh and Pakistan. All-cotton commitments rose to 3.729 million RB, 26% 
of the USDA forecast.

   Old-crop data showed net commitment reductions of 68,500 RB as cancellations 
of 69,400 RB exceeded gross sales of 900 RB. With one day left in the 2019-20 
marketing year, commitments -- outstanding sales of 3.056 million RB plus 
shipments -- totaled 17.66 million RB, still 120% of the export estimate.

   Shipments of upland and Pima combined of 363,100 RB, up from 328,600 the 
previous week, brought exports for the season to 14.614 million RB, 99% of the 
2019-20 projection. Exports were within roughly 130,000 RB of the forecast.

   Upland shipments of 346,800 RB, up 8% from the previous week and 13% above 
the four-week average, went to 17 countries, led by China, Vietnam, Pakistan, 
Turkey and Bangladesh.

   Traders noted reports that senior U.S. and Chinese officials will review 
implementation of their Phase 1 trade deal during an Aug. 15 videoconference. 
U.S. Trade Representative Robert Lighthizer and Vice Premier Liu He of China 
will participate in an initial six-month review of the pact activated on Feb. 
15, Reuters reported. The meeting plans were first reported by the Wall Street 

   China's U.S. all-cotton commitments stand at 3.693 million RB for 2019-20, 
21% of total old-crop export sales, and 1.274 million RB for 2020-21, 34% of 
new-crop bookings. Those percentages rank as the second largest to Vietnam's 
22% for 2019-20 and first for 2020-21.

   On the crop scene, U.S. ratings declined during the week ended Aug. 3, 
according to USDA, with good to excellent falling four percentage points to 
45%, fair gaining four points to 39% and poor to very poor remaining at 16%. A 
year ago, good-excellent was 54%, fair 33% and poor-very poor 13%.

   Cotton squaring advanced seven points to 91%, down a point from last year 
but even with the five-year average, while boll setting increased 12 points to 
54%, down a point from both last year and the average.

   Crop ratings slipped in Alabama, Georgia, Mississippi, the Carolinas, 
Oklahoma, Texas and Virginia, improved in Arizona, Arkansas and California and 
held steady elsewhere.

   Good-excellent cotton in Texas fell six points to 25% and poor very poor 
increased a point to 24%. The statewide cotton index dropped to 59 from 61 the 
previous week and 69 last year.

   Squaring in Texas at 90% stood a point below last year but up a point from 
the five-year average, while boll setting at 45% was even with a year ago and 
two points above average. Open bolls at 10%, reported for the first time this 
season, compared with 13% last year and 11% on average.

   Most of the state received from trace amounts to 3 inches of rain, but areas 
of the Upper Coast, the northern High Plains, South Central and Southeast 
recorded up to 6 inches and a few areas of South Texas and the Lower Rio Grande 
Valley reported up to 15-18 inches in the wake of Hurricane Hannah.

   Some preliminary estimates pegged the Hannah production loss in Texas around 
175,000 bales, though it was expected to take weeks to determine the extent of 
the losses. Most of the valley crop had been defoliated.  Producers were 
concerned about cottonseed sprout. Modules in fields and gin yards were sitting 
in water. Some later-planted cotton in the Coastal Bend and Upper Coast 
benefited from the rain.

   Only an estimated 2% of the valley crop had been harvested. Initial 
estimates by extension specialists and producers indicated cotton crop losses 
totaled 90% to 100% on around 138,000 acres.

   Irrigation continued on the High Plains with daytime temperatures ranging 
mostly in the low to upper 90s and nighttime lows in the 70s. Scattered showers 
and rainfall of 3-plus inches helped cotton in some areas, while droughty 
conditions prevailed elsewhere. Most neared peak bloom and water use in 
northern areas. Questions arose as to whether some heavily pumped irrigation 
wells could meet plant water demands with forecasts calling for hot 
temperatures and skimpy rainfall ahead.

   Hurricane Isaias, which made landfall on southern North Carolina Monday 
night as a Category 1 storm, appeared to have brought less rain than expected 
to the Carolinas and Virginia and little crop damage except possibly from winds 
near the coast. Rainfall benefited some cotton, considered likely overall more 
than offsetting any crop damage.

   On the money-flow front, trend-following funds and speculators sold a 
combined 7,026 lots during the week ended July 28, up from 1,002 lots the prior 
week, to reduce their net longs to 17,338, according to the latest supplemental 
traders-commitments data reported by the Commodity Futures Trading Commission.

   Hedge funds sold 5,528 lots, liquidating 4,881 longs and adding 647 shorts 
to cut their net longs to 15,820, while non-reportable traders -- predominantly 
small specs -- sold 1,498 lots to trim theirs to 1,518. Index funds sold 272 
lots to nudge their net longs down to 70,296.

   Commercials bought 7,297 lots, covering 5,196 shorts and adding 2,101 longs 
to reduce their net shorts to 87,634. Prices during the reporting week fell 
from 63.46 cents to 59.51 cents, basis December. Combined open interest 
declined 3,287 lots to a delta-adjusted 218,600.

   Disaggregated data showed managed-money traders sold a net 4,738 lots, 
liquidating 4,896 longs and covering 158 shorts to drop their net longs to 

   Meanwhile, CFTC on-call data released after the close Thursday showed mills 
priced a total of 158 lots last week, dropping their unpriced sales to 89,199, 
51.1% of the futures OI. Producers priced 430 lots to cut their unfixed 
position to 47,067. The net call difference increased 272 lots to 42,132, 24.2% 
of the OI.

   On the Washington scene, a proposal introduced by the Senate Republican 
leadership in a series of bills in stalled coronavirus relief negotiations 
includes about $20 billion for USDA to use to support impacted agricultural 
producers and processors.

   The inclusion of "processors" is seen as broader than the policy and funding 
provided in the CARES Act adopted earlier this year but is still viewed as less 
specific than the language the National Cotton Council and others in 
agriculture want in the final package.

   Along with parameters for support for crop producers, the NCC has continued 
to advocate for cotton and textile specific language that would direct USDA to 
assist cotton textile mills and merchandisers.

   Negotiations on economic stimulus measures continued into the night Thursday.

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