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Weekly Cotton Comments 05/26 04:59
Cotton Falls Heavily Prior to Long Weekend
Export sales for this season and next rose to 218,800 RB, with new-crop
sales the largest since Feb. 23; shipments still on pace to make the estimate.
U.S. crop 45% planted; topsoil moisture adequate-surplus in 75% of the northern
Texas High Plains. Traders made small net changes prior to last week's price
jump. Unpriced on-call mill new-crop sales rose 4,292 lots to 35,088.
Bangladesh lifted fumigation order on U.S. cotton.
Duane Howell
DTN Contributing Cotton Analyst
Cotton futures tumbled to steep losses for the marketing week ended
Thursday, with spot July falling 654 points or 7.55% to close at 80.12 cents,
its lowest finish since May 11.
July, which lost its open interest leadership to December, settled near the
low of its wide 812-point trading range from 87.98 cents last Friday to 79.86
cents on Thursday. December lost 522 points to close at 78.50 cents, only a
tick off the low of its 585-point range from 84.30 to 78.45 cents. Both
contracts have lost closed lower four sessions in a row and five of the last
six.
The market will be closed Monday for Memorial Day.
Anxieties about a fresh stalemate in U.S. debt ceiling talks and a possible
default, growing worries about China's economy and positioning for the long
holiday weekend ahead contributed to the setback from the prior week's big
jump. Rains on the Texas High Plains also weighed on market sentiment amid
memories of widespread rainfall in the country's largest cotton patch on some
Memorial Day weekends.
The inverted July-December switch narrowed 132 points to close at a
162-point July premium, while the December-March spread shed 42 points to
settle at 14 points of carry.
Volume averaged an estimated 42,091 lots per session. Open interest grew
7,912 lots to 193,480, with July down 6,434 lots to 78,502, December up 10,782
lots to 85,310 and March up 2,229 lots to 13,366. Certificated stocks were
unchanged at 63 bales.
Cash online sales fell to 16,533 bales from 34,291 bales the previous week
on The Seam. Prices on average were nearly unchanged at 76.77 cents, down two
ticks, reflecting a 74-point gain to 24.98 cents in premiums over loan values.
Grower-to-business sales were 3,033 bales and business-to-business sales were
13,500 bales.
On the competitive front, the average of the five lowest-priced 2022-23
world growths for the Far East gained 98 points to 94 cents, while the lowest
priced U.S. growth gained 210 points to 94.40 cents. U.S. cotton thus moved
from a 72-point discount to a 40-point premium. The adjusted world price
climbed to 69.08 cents. The five lowest-priced forward quotes gained 56 points
to average 94.25 cents, a 25-point new-crop premium.
The Cotlook A Index of 2022-23 world values coming into Thursday had fallen
60 points to 94.45 cents, narrowing the international basis by 157 points to
10.10 cents over the prior-day spot July futures settlement.
On the demand front, net U.S. all-cotton export sales for this season and
next climbed to 218,800 running bales during the week ended May 18 from 170,000
RB the prior week and 137,800 RB last year, USDA reported.
Sales for 2022-23 slipped to 134,500 RB from 141,170 the week before but
were up from 41,100 RB a year ago. New-crop sales rose to 84,300 RB, largest
since Feb. 23 and up from 28,100 RB the previous week but down from 96,700 RB
in forward sales last year.
All-cotton 2022-23 commitments -- outstanding sales of 3.655 million RB plus
shipments -- reached 13.073 million RB, down 2.301 million RB or 15% from a
year ago and 107% of this month's upwardly revised USDA export estimate.
Year-ago commitments were 101% of final shipments. New-crop bookings rose to
1.613 million RB, down 1.589 million RB from forward sales last year.
Outstanding 2022-23 sales plus new-crop bookings totaled 5.269 million RB,
3.313 million RB below the comparable total a year ago.
Combined Upland and Pima or extra-long staple shipments fell to 282,200 RB
from 347,300 RB the prior week and 323,900 RB last year. This brought
all-cotton shipments for the season to 9.418 million RB, down some 578,000 RB
or about 6% from last year and 77% of the export forecast. Year-ago shipments
were 70% of the 2021-22 final estimate. Shipments averaging roughly 280,400 RB
per week would achieve the projection.
On the U.S. crop scene, cotton planting advanced 10 percentage points to 45%
of their projected acreage last week, seven points behind a year ago and five
points below the five-year average, USDA reported.
Progress in Texas advanced five points to 35% planted, compared with 42%
last year and 43% for the five-year average. In Georgia, the second largest
cotton state, growers had planted 51%, compared with 56% last year and 57% on
average.
Rains fell throughout most of Texas, ranging mostly from trace amounts to
upwards of 3 inches. Isolated areas in the Edwards Plateau and the southern
Rolling Plains got up to 6 inches. Drought conditions improved but still ranged
from none to exceptionally dry, with areas of the Edwards Plateau and High
Plains remaining the driest.
Topsoil moisture improved to adequate to surplus in 75% of the northern High
Plains and 47% of the southern High Plains, with subsoil moisture also adequate
to surplus in the north but short to very short in 73% of the south.
At midweek, precipitation since Jan. 1 had totaled 3.73 inches at Lubbock,
down from the normal 5.63 inches, and 5.71 inches at Amarillo, up from the
normal of 5.61 inches. This is the first time this year Amarillo's
precipitation has topped the long-term average. Forecasts called for ongoing
daily showers, thunderstorms, hail and locally heavy rainfall, with rain
chances in the Lubbock area ranging from 20% to 50% through Sunday.
Cotton progress stalled in some areas of the Texas Upper Coast which
received more than 4 inches of accumulated rainfall last week. The crop needed
some sunny weather. There were yellowing leaves on corn and sorghum in the
Coastal Bend owing to excessive moisture. Warm, dry conditions returned to
South Texas this week.
Kelly Siders, extension integrated pest management agent for Hockley,
Cochran and Lamb counties west of Lubbock, has been finding increasing numbers
of thrips.
"I would caution producers to really pay attention to those young cotton
plants as they emerge," he said, advising to be prepared to use foliar
treatments if protection does not hold from seed treatment or in-furrow
treatments.
On the money-flow front, traders made small changes in net positions during
the week ended May 16, with hedge funds buying a net 596 lots to lower their
net shorts to 15,087 lots and non-reportable traders -- mostly speculators --
buying a net 163 lots to lift their net longs to 696 lots.
Hedge funds added 1,118 longs and 522 shorts and specs covered 376 shorts
and liquidated 213 longs, according to the weekly traders-commitments data from
the Commodity Futures Trading Commission.
On the sell side, commercials sold a net 77 lots, adding 6,722 shorts and
6,645 longs to nudge their net shorts up to 40,656, while perpetually net long
index funds sold 682 lots to shave their net longs to 55,047 lots.
Prices that week traded within a 448-point range in spot July, moving from a
low of 79.49 to a high of 83.97 cents. July then leaped to 87.90 cents --
highest since Feb. 7 -- and closed the calendar week with a gain of 619 points
to 86.72 cents. Combined open interest for the reporting week rose by 10,963
lots to a delta-adjusted 231,305.
Meanwhile, unpriced mill on-call sales from December 2023 through July 2024
rose by 4,292 lots to 35,088 last week, CFTC call data showed after the close
Thursday. Unfixed producer purchases increased 855 lots to 30,769, widening the
net call difference by 3,437 lots to 4,319, which was 4.4% of the futures OI.
The ratio of unpriced mill sales to unfixed producer purchases was 1.14:1, not
counting any options hedges.
On the international scene, Bangladesh has announced s special regulatory
order allowing the importation of U.S. cotton without a fumigation-on-arrival
requirement.
The action removes an export impediment to U.S. cotton imports to
Bangladesh, the National Cotton Council said. Bangladeshi mills have been
paying more than a million dollars annually for unnecessary fumigation on
cotton imported from the United States, the council said.
U.S. exporters will continue to use APHIS-generated phytosanitary
certificates. Under the new regulation, the certificate will have additional
language confirming there are no live boll weevils in U.S. baled cotton.
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