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Weekly Cotton Comments                 01/24 05:35

   Cotton Dips Modestly Amid Ramped Up Volatility

   Volume jumped. NCC applauded new waters rule. Upland classing reached nearly 
17.8 million RB; heavy rains hindered Delta module retrieval. Fifty percent of 
Kansas crop ginned. Hedge funds continued adding to net longs. USDA updated ELS 
competitiveness program.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures finished with a modest marketing week loss for the second 
straight week amid ramped up volatility and a jump in volume. 

   Spot March lost 19 points to settle the holiday-shortened trading week ended 
Thursday at 70.03 cents, trading within an expanded 266-point range from 71.37 
cents last Friday to 68.71 cents -- lowest since Jan. 3 -- on Wednesday. 
Technically, the break left 71.37 as nearby resistance that March needs to 
surmount if it is to achieve new highs above the eight-month peak reached Jan. 
13 at 71.96. 

   March closed on a triple-digit gain last Friday, plunged to its lowest 
finish since Jan. 3 on Tuesday following Monday's holiday, recaptured on 
Wednesday what it had lost the prior day, and ended with an indecisive 
inside-day on Thursday. It ended back below its nine-day and 18-day moving 

   May dropped 44 points for the week to settle at 70.75 cents, July lost 49 
points to close at 71.59 cents and December shed 119 points to finish at 70.70 

   Concerns about the coronavirus outbreak spreading from China and hitting the 
global economy, though some traders viewed the virus as a market diversion, and 
mixed earnings results contributed to the pressure on cotton. Commercial buying 
was noted on the price break. Some traders wondered if fresh business may have 
been consummated ahead of the long holiday break for the Chinese New Year, 
which officially begins Saturday. 

   Volume rose to an average of 44,946 lots per session from 36,853 lots the 
prior week. The turnover included a huge combined 111,657 lots on Tuesday's 
52,564 and Wednesday's 59,093, the largest single-session volume since Nov. 13.

   Open interest expanded 9,383 lots to 261,004, with March's down 1,337 lots 
to 122,431, May's up 4,415 lots to 62,032, July's up 4,613 lots to 39,779 and 
December's up 1,038 lots to 32,518. Certificated stocks were unchanged at 6,792 
bales, smallest since Oct. 31, 2017. 

   Cash online sales fell to 54,165 bales from 101,350 bales on The Seam. 
Prices slipped 48 points to an average of 62.29 cents per pound, with premiums 
over loan repayment rates up 50 points to an average of 11.59 cents. 
Grower-to-business sales slid to 39,082 bales from 93,508 bales and 
business-to-business sales rose to 15,083 bales from 7,842 bales. Offerings 
late the previous day were 256,494 bales. 

   On competitiveness, the average of the five lowest-priced world growths for 
the Far East eased off 11 points to 78.54 cents, quotes reported by USDA 
showed, while the lowest-priced U.S. growth fe11 15 points to 79.40 cents. The 
U.S. premium thus narrowed four ticks to 86 points. The adjusted world price 
for the program week beginning today is 61.29 cents, 9.29 cents over the base 
U.S. loan rate. 

   On the policy scene, the National Cotton Council welcomed the release 
Thursday by the Environmental Protection Agency and Corps of Engineers of the 
Trump administration's version of the "waters of the United States," officially 
named the Navigable Waters Protection Rule. 

   "This final rule removes many elements from federal control that were 
initiated in the previous administration," NCC Chairman Mike Tate said in a 
statement. "That includes features that contain water only in response to 
rainfall, groundwater, many farm and roadside ditches, prior converted cropland 
and stock watering ponds." 

   The Alabama cotton producer noted that the NCC has worked for this rule, 
which he said will restore power to states for controlling their own waters and 
their local land use and zoning issues. 

   "The U.S. cotton industry has long sought consistency and simplicity in 
water regulations," Tate reiterated, "because all of agriculture deserves a 
commonsense and understandable rule that not only ensures environmental human 
health but protects farmland and farmers' rights to conduct operations in a 
responsible and economically sustainable manner with flexibility that wasn't 
present under the 2015 rule." 

   Tate said the NCC will monitor the rule's implementation. 

   On the U.S. crop scene, classing of 361,795 running bales of upland brought 
the season's total to 17.776 million RB for the week ended Jan. 16, roughly 94% 
of the January crop estimate and up around 19% from 14.948 million RB a year 
ago when about 88% of the final output had been graded. 

   Tenderable cotton totaled 72.6% for the week and 79.3% for the season, 
compared with 56.8% and 66.3%, respectively, last year. Samples for grading 
came from 245 gins for the week and 506 for the season. 

   Pima classing of 30,051 RB brought the extra-long staple total for the 
season to 506,440 RB, down from 595,903 a year ago.  Sixteen gins submitted 
samples for grading, down from 24 for the season.

   Wet conditions in recent weeks had brought fieldwork to a standstill in the 
Southeast. Many gins had finished operations for the season in the Lower 
Southeast or gone on gin days, though some larger gins continued daily 
operations. Ginning was winding down in the Upper Southeast. 

   Heavy rains in the Delta produced localized flooding and hindered ginning 
and the retrieval of cotton modules on gin yards and turnrows. Precipitation 
totals are well above average as a result of prolonged wet weather. The Dumas 
classing office expected to continue operations well into February because of 
ginning delays in Arkansas. Growers hoped no significant quality issues would 
arise owing to water-saturated modules. 

   Ginning continued in the Texas Plains where most dry fields have received 
beneficial rainfall and wintry precipitation. On the other end of the state, 
fieldwork was active in the Rio Grande valley where planting in the traditional 
source of the nation's first new-crop cotton is expected to begin in late 

   All gins continued operating in Kansas where an estimated 50% of the crop 
had been ginned. Producers booked planting seed for an expected increase in 
Kansas cotton acres. Kansas ginners have adjusted their estimates of the 2019 
crop upward as more cotton has been delivered to gins than expected. Ginning 
also continued in Oklahoma; some gins have finished the season. 

   Harvesting neared completion in the Desert Southwest and ginning continued 
uninterrupted. Warehouse activity was brisk. Sources said water supply was good 
and expected an increase in cotton acres in the El Paso area.  Ginning also 
continued in the San Joaquin Valley. The Visalia classing office continued to 
operate two eight-hour shifts. 

   Looking at money flows, trend-following funds remained on the buy side as 
prices hit new eight-month highs, raising their net longs 9,904 lots to 18,019 
during the latest reporting week ended Jan. 14, according to the latest 
supplemental traders-commitments data. 

   They added 5,689 longs and covered 4,835 shorts, the Commodity Futures 
Trading Commission reported. Index funds bought 4,199 longs to hike their net 
longs to 80,646; non-reportable traders sold a net 89 lots to nudge theirs down 
to 8,685. Commercials sold a net 14,014 lots, adding 15,528 shorts and 1,515 
longs to push their net shorts up to 107,350 lots. 

   Managed-money traders added 5,474 longs and covered 3,909 shorts, boosting 
their net longs 9,383 lots to 30,263, disaggregated data showed. 

   Prices traded from 69.05 to 71.96 cents, highest since May 9, during the 
CFTC reporting week. Combined open interest grew for the sixth straight 
reporting week, rising 19,466 lots to a delta-adjusted 299,557. 

   On the demand front, USDA's update of special competitiveness provisions for 
extra-long staple (ELS) cotton this month added the Egyptian Giza 94 price 
quote to the foreign-growth calculations used in determining program payment 

   Industry groups had advocated the change, saying it was needed to accurately 
reflect the foreign growths competing with U.S. ELS or Pima. The ELS program, 
implemented in October 1999, is designed to assure the marketability of U.S. 
ELS cotton. Pima export sales for the week ended Jan. 9 climbed to a marketing 
year high of 34,300 RB. 

   Since December 2014, ELS payment rate determinations have been based upon 
differences between the U.S. ELS price and the Israeli Pima H1 price, both of 
which are reported daily by Cotlook Ltd. In December 2017, Cotlook began 
reporting daily quotes for Giza 94, which accounts for more than one-quarter of 
global long and extra-long staple cotton trade. 

   Based on a broad range of publicly available market data and information, 
USDA has determined that Giza 94 is a competing growth of ELS cotton. Quality 
adjustments for Giza 94 and Israeli Pima H1 have been established using 
available data on the physical characteristics of those growths, as well as 
other market data and information. 


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