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Weekly Cotton Comments                 09/18 05:22

   Cotton Hits 29-Week High, Ends Near Mid-Range

   Traders awaited hurricane crop assessments. Ending cotton stocks projected 
lower but still burdensome. Broad import bans shelved on cotton products from 
China's Xinjiang. Crop conditions held essentially steady; boll opening at 47%. 
Corpus classing reached 566,992 RB. Hedge funds cut net longs for the first 
time in six weeks. Quiet on-call activity noted.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures surged to a 29-week high on concerns about hurricane damage 
to both yields and quality in a major U.S. production area and then dipped 
three sessions in a row as traders weighed the potential crop impact against 
another round of bearish supply-demand estimates.

   Benchmark December finished with a gain of 104 points or 1.6% to 65.85 cents 
for the marketing week ended Thursday. It settled just above the midpoint of 
the 232-point range from 64.61 last Friday to 66.93 cents Tuesday, highest 
since Feb. 26. Short-range technical support is seen at 64.01 and the September 
low of 63.40, with resistance at 66.93 and 70.65.

   The December-March spread narrowed seven ticks to 94 points of carry.  
December 2021 gained 67 points to close at 66.18 cents. Thinly traded October's 
first notice day is next Thursday.

   Traders awaited crop assessments in the wake of Hurricane Sally, which made 
landfall Wednesday morning near Gulf Shores, Ala., as a Category 2 storm. The 
brunt of the potential cotton crop damage appeared to be in Alabama and 
Georgia, where bolls as of Sunday were reported 55% and 52% open, respectively, 
down from 66% and 67% last year.

   Some cotton in Florida, a small producer, appeared hard hit, and an inland 
flash flood threat was expected to spread into the Carolinas and Virginia.  An 
extended period of dry, sunny weather could "bleach out" discolored cotton and 
mitigate quality losses, but the heavy rain was reported to have strung some 
cotton from the bolls. Seed already had sprouted in open bolls in Florida.

   Volume dipped to an average of 25,848 lots per session from 27,068 lots the 
prior week. Open interest increased 5,280 lots to 231,972, with December's up 
3,242 lots to 125,884 and March's up 1,802 lots to 55,114. Certificated stocks 
dropped a single bale to 5,912 bales.

   Cash online sales quickened to a six-week high on The Seam, rising to 26,964 
bales from 11,955 bales. Prices gained 200 points to average 59.05 cents, with 
premiums climbing 114 points to 7.98 cents. Sales included 24,371 bales on the 
grower-to-business exchange and 2,593 bales on the business-to-business 
platform.

   On the competitive front, the average of the five lowest-priced growths for 
the Far East climbed 111 points to 70.13 cents, while the lowest-priced U.S. 
cotton landed there gained 120 points to 74.20 cents. The U.S. premium thus 
widened nine ticks to 4.07 cents.

   The adjusted world price rose to 50.88 cents, resulting in the marketing 
loan gain or loan deficiency payment falling to 1.12 cents for the program week 
beginning Friday.

   The market showed muted reaction to a jump in net U.S. all-cotton weekly 
export sales to a whopping 547,600 running bales, largest -- not counting 
rollovers of unshipped sales with the transition from one marketing year to the 
next -- since at least Feb. 14, 2019 when the USDA report was a six-week total 
(1.019 million RB) following a shutdown of federal offices.

   Net 2020-21 upland sales of 519,600 RB for the week ended Sept. 10, up from 
144,100 the prior week and 100,900 a year ago, reflected gross sales of 523,600 
RB and cancellations of 4,000 RB. Sales went to 13 countries, with China taking 
440,100 RB or 85%.

   No new sales were reported for 2021-22, leaving the total at 400,200 RB, 
widening the gap behind forward sales a year ago to 281,000 RB.

   All-cotton 2020-21 commitments -- outstanding sales of 6.167 million RB plus 
shipments -- leaped to 7.9 million RB, narrowing the lag behind last year to 
8%. Cumulative sales were 56% of the new export forecast, compared with 57% of 
the latest upwardly revised estimate for 2019-20 at the corresponding point 
last season.

   Upland-Pima shipments combined slipped to 204,400 RB from 241,200 the week 
before but were up from 173,800 RB last year. Upland shipments of 187,900 RB, 
down 19% from the previous week and 38% from the four-week average, went to 21 
countries, led by China, Vietnam and Indonesia.

   All-cotton shipments for the season of 1.733 million RB were up 17% from a 
year ago and were 12% of the USDA forecast; year-ago exports were 10% of the 
final tally for 2019-20, which was obtained by averaging shipments data 
reported by the U.S. Census Bureau and USDA's export sales reports when 
converted to 480-pound statistical bales. Shipments need to average roughly 
270,200 RB a week to make the 2020-21 projection.

   While U.S. and world ending stocks fell in USDA's monthly supply-demand 
estimates, the projected 2020-21 carryovers remain burdensome.

   U.S. ending stocks are forecast down 400,000 bales from a month ago to 7.2 
million, reflecting a stocks-to-use ratio of 42.1%, up from 41% in 2019-20 and 
the largest since 2007-08. The projected carryout is slightly below the final 
2019-20 estimate of 7.25 million, largest in 12 years.

   Crop prospects fell 1.02 million bales to 17.06 million, in line with most 
trade estimates, with reductions in every region. But demand forecasts were cut 
600,000 bales to 17.1 million, lowest in five years, with domestic use down 
200,000 bales 2.5 million and exports down 400,000 bales to 14.6 million. 
Domestic mill use is forecast up 16% from 2019-20, but exports are down 900,000 
bales and the lowest since 2015-16.

   Compared with a 50,000-bale downward revision to 2.15 million in domestic 
mill consumption in 2019-20, the 2020-21 projection still is up 16%. The 
reduced supply and increased foreign competition are expected to cut exports 
930,000 bales from the upwardly revised 2019-20 estimate.

   The season-average price for upland cotton is forecast at 59 cents per 
pound, unchanged from the previous month and down from 59.50 cents in 2019-20. 
The July upland farm price was 60.40 cents, according to USDA, up 3.90 cents 
from the previous month but down from 74.70 a year earlier.

   World ending stocks are forecast at 103.84 million bales, down 1.07 million 
on the month but up 4.4 million from 2019-20. The global carryout would 
represent 92.1% of mill use, second highest on record behind 97.4% last season.

   Global production is projected down 330,000 bales from a month ago to 117.20 
million, down 4.78 million or 3.9% from 2019-20. World cotton consumption is 
forecast down 360,000 bales from last month to 112.69 million, up 10.56 million 
bales or 10.3% from last season.

   On the Washington scene, the Trump administration shelved plans for a broad 
import demand on cotton and tomato products from China's Xinjiang region while 
announcing narrower bans on products from five specific entities, Reuters 
reported.

   Department of Homeland Security Acting Secretary Kenneth Cuccinelli said the 
new "Withhold Release Orders" on cotton, textiles, apparel hair products and 
computer parts are aimed at combating China's use of forced labor by detained 
Uighur Muslims in Xinjiang.

   Foreign Ministry spokesman Wang Wenbin called the forced labor issue 
"entirely fabricated," adding that China will take all necessary measures to 
protect its companies' legitimate rights and interests.

   A China-based cotton trader was quoted as saying the new orders should be 
"largely discounted" as they impacted only a few, small suppliers. However, he 
said any expansion of the ban to make it regional would be bad for business.

   The administration is conducting more legal analysis of the region-wide 
import bans, Cuccinelli said.

   People familiar with the administration's internal discussions said 
officials who had raised concerns about the broad orders and their effect on 
supply chains included Treasury Secretary Steven Mnuchin, U.S. Trade 
Representative Robert Lighthizer and Agriculture Secretary Sonny Perdue.

   On the U.S. crop scene, ratings held basically steady last week, with cotton 
rated fair to better remaining at 73%, 10 percentage points below a year ago, 
USDA data indicated. Boll opening increased 10 points to 47%, four points below 
last year but two points above the five-year average.  Harvesting at 6% 
compared with 8% a year ago and the average.

   Fair to better cotton stayed at 58% in Texas, 94% in Georgia and 100% in 
Alabama but dipped a point to 95% in Arkansas and dropped five points to 90% in 
Mississippi. The Texas crop index edged up a point to 53 -- down from 62 last 
year -- on a seven-point move from very poor (11%) to poor (31%). The Texas 
crop was 13% harvested, compared with 14% last year and the average.

   Classing at Corpus Christi increased to 149,825 RB during the marketing week 
ended Sept. 10, boosting the total for the season to 455,249 RB, down from 
536,552 RB a year ago.  Tenderable cotton totaled 93.6%, up from 82.4% last 
year. An additional 113,721 RB classed through Wednesday brought the season's 
total to 566,922.

   Ginning advanced in the Upper Coast, though storms slowed harvesting.  Gins 
processed backlogs of modules in the Coastal Bend.  More gins opened for the 
season in the Blacklands. Several records for the low high and low temperatures 
were set on the High Plains, raising concerns for the fiber maturity slowdown 
in cotton that still needed boll-filling time.

   Elsewhere, some producers in the Lower Southeast already had voiced concerns 
about boll-rot and hard-locked bolls in fields had received heavy rains in 
recent weeks. Defoliation slowly gained momentum and harvesting had commenced 
in the South Delta. Ginning was expected to begin in a week to 10 days. Some 
gins reported a shortage of skilled laborers and may be forced to operate a 
single shift.

   Meanwhile, trend-following funds reduced their net longs for the first time 
in six weeks, selling 8,642 lots to cut them to 34,833 lots during the week 
ended Sept. 8, according to supplemental traders-commitments data reported by 
the Commodity Futures Trading Commission.

   They liquidated 6,251 longs and added 2,391 shorts. Index funds sold 3,302 
lots to drop their net longs to 76,349, while non-reportable traders sold 2,907 
lots to shave theirs to 3,520. Commercials bought 14,851 lots, adding 13,973 
longs and covering 878 shorts to drop their net shorts from a two-year high to 
114,702 lots.

   Prices during the reporting week ranged from 65.96 to 63.40 cents, basis 
December. Combined open interest increased 7,370 lots to a delta-adjusted 
257,566, a new high in these weekly reports since April 7.

   Relatively quiet on-call activity saw mills adding a total of 455 lots to 
hike their unpriced sales to 98,480 lots last week, while producers boosted 
their unfixed position by 910 lots to 48,444. The net call difference of 50,036 
lots represented 23.03% of the open interest, the CFTC report showed, compared 
with 23.5% a week earlier.




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