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Weekly Cotton Comments                 02/15 06:08

   Cotton Falls to 15-Month Low 

   Forecasts eyed for buildup in world old-crop stocks, higher U.S. plantings 
and burgeoning production in Brazil. First Notice day looms Thursday.  Cash 
online sales declined to 20,286 bales. NCC survey showed planting intentions of 
14.45 million acres. Record crop forecast for Brazil. Mills added on-call sales 
for first time in six weeks. Hedge funds boosted net shorts to 13,707 lots. 
Upland crop 94% classed.

By Duane Howell
DTN Cotton Correspondent

   Spot cotton futures fell to a 15-month low amid forecasts for a buildup in 
old-crop world ending stocks, an expansion projected in U.S. cotton plantings 
this spring and burgeoning production in Brazil where 2018-19 exports have 
surged to a new record. 

   March shed 268 points for the marketing week ended Thursday to close at 
70.13 cents, trading within a 268-point range from 73.01 to 69.53 cents. The 
March-May spread widened to new contract marks out to 162 points, possibly 
encouraging some commercial rolling of hedge shorts, and settled at 158 points 
carry. First notice day for March is Thursday. 

   May lost 221 points to close at 71.71 cents, July dropped 224 points to 
finish at 73.07 cents and December fell 182 points to settle at 72.71 cents. 
The inverted old-crop, new-crop July-December straddle traded in to even money 
and narrowed 42 points to settle at 36 points. 

   Cash online sales declined to 20,286 bales from 44,247 bales the prior week. 
Prices fell to an average of 58.52 cents per pound from 66.66 cents, with daily 
averages ranging from 60.36 to 55.68 cents. Loan redemption rates averaged 
49.59 cents, down from 51.39 cents, and daily averages ranged from 47.48 to 
53.12 cents. 

   Traders had barely absorbed results of the National Cotton Council survey 
showing U.S. producers intend to plant 14.45 million cotton acres this spring, 
up 2.5% from upward revisions to 14.099 million acres reported in USDA's 
delayed annual 2018 crop production summary this month, when a larger estimate 

   Informa Economics, Memphis-based analytical firm, forecast plantings of 
14.65 million acres, up 3.9% from the latest USDA figure. The council survey, 
conducted from mid-December through mid-January, showed upland intentions of 
14.186 million acres of upland, up 2.4% from USDA's new 2018 estimate, and 
264,000 acres of Pima, up 6.4% from 249,000 acres.

   Abandonment of 10.1% would result in a harvested area of 13 million acres, 
and a per-acre yield of 840 pounds would generate a crop of 22.7 million bales 
-- 21.9 million of upland and 782,000 bales of Pima.

   The NCC projected domestic mill use of 3.3 million bales and -- assuming 
additional tariffs by the United States and China will be removed in advance of 
the 2019 marketing year -- exports of 17.4 million bales. If realized, those 
would be the second highest U.S. exports since 2005-06 when they were 17.67 
million bales. 

   With total market offtake falling short of production, ending stocks would 
rise to 6.3 million, highest since the 2008 marketing year. And a stocks-to-use 
ratio of 30% would be the highest since the 2015 crop year. 

   Earlier, USDA's 2018-19 supply-demand updates, delayed by the partial 
government shutdown, pegged U.S. all-cotton production at 18.39 million bales, 
down from 18.59 million foreseen in December and in line with trade 
expectations for 18.4 million bales. 

   Domestic mill use slipped 100,000 bales to 3.2 million and the export 
estimate remained at 15 million bales. Most trade analysts hadn't expected the 
export forecast to change until USDA's weekly sales-shipments reports reach a 
more timely status. 

   Ending stocks of 4.3 million bales, down 100,000 from December, contrasted 
with trade expectations for 4.37 million. The USDA forecast of the 
season-average farm price fell 2 cents to 72 cents per pound. 

   Bearish global estimates cut mill use nearly 2 million bales to 123.64 
million, with production down a slight 290,000 bales to 118.45 million. The 
estimated crop shortfall narrowed 1.7 million bales to 5.19 million. World 
ending stocks climbed 2.31 million bales to 75.50 million, still down from 
upwardly revised beginning stocks of 81.05 million bales. 

   A 1.89-million-bale cut to 120.44 million in foreign cotton consumption 
reflected mainly cuts for China and India on slower economic growth. Foreign 
production rose by a slight 90,000 bales to 100.15 million, with larger crops 
in China, Brazil and Australia more than offsetting lower outputs in Turkey and 

   Rains in Brazil, with more expected, bolstered prospective cotton 
production, which USDA raised 400,000 bales to a record 11 million, up from 
9.22 million in 2017 and 7.02 million in 2006. This growth is attributed mainly 
to production in the states of Mato Grasso and Bahia, which combined accounted 
for almost 90% of 2017-18's record crop. 

   Mato Grasso has seen greater production during the second crop (safrinha) 
season -- the bulk of harvest is July through September -- and Bahia is quickly 
expanding area amid strong price signals, according to USDA's Foreign 
Agricultural Service. 

   Brazil's exports hit monthly records in November and December. China was the 
primary destination as favorable Brazilian prices and high Chinese tariffs on 
U.S. cotton made Brazil's Southern Hemisphere crop an attractive alternative. 
With China's imports raised 500,000 bales this month to 7.5 million and its 
domestic stocks -- though up 2 million bales to 32.37 million -- still the 
lowest since 2011-12, Brazil is expected to help meet the shift in demand. 

   Continued improvement in grading and classification of Brazil's cotton also 
is supporting strong interest from overseas buyers. Stagnant demand by Brazil's 
domestic yarn and textile industry is expected to encourage future shipments 
amid record supplies. Expanding arable land and two crops per year support 
Brazil's increased export competitiveness as 2018-19 exports are forecast a 
third higher than last season, FAS says. 

   On the U.S. demand scene, net all-cotton export sales for shipment this 
season quickened to 305,800 running bales during the week ended Jan. 3 from 
236,500 RB the prior week, USDA reported Thursday. Sales remained well ahead of 
the pace required to match USDA's export estimate. 

   Net upland sales of 299,800 RB, up 31% from the prior week and 52% from the 
four-week average, reflected gross sales of 309,700 and cancellations of 9,900. 
These went to 13 countries, led by Pakistan, India, Turkey, Vietnam and 

   All-cotton commitments -- outstanding sales of 7.601 million RB plus 
shipments -- rose to 11.346 million RB, narrowing the lag behind year-ago 
cumulative sales by 25,000 RB to 186,000. Commitments were 78% of the USDA 
export estimate, compared with 75% of final shipments at the corresponding 
point last season and the five-year upland average of 69%. 

   Shipments of upland and Pima combined of 197,300 RB, down from 202,300 the 
previous week, boosted the total for the season to 3.746 million RB, up a 
narrowed 1% or 45,000 RB from year-ago exports and 26% (even with the five-year 
average for upland) of the USDA forecast. Year-ago exports were 24% of the 
2017-18 final. 

   All-cotton shipments averaging roughly 372,600 RB are needed over the 29 
weeks remaining in the marketing year to achieve the USDA estimate, while 
weekly sales averaging around 110,500 would match the export forecast. 

   Sales for shipment next season of 19,400 RB, down from 32,200 RB the week 
before and 74,000 RB below forward sales during the corresponding week last 
season, lifted 2019-20 commitments to 2.142 million RB. That's still 776,000 RB 
ahead of forward commitments last year.

   Long-term forecasts issued by USDA Thursday projected exports jumping to 
17.1 million bales in 2019-20, and totaling 16.6 million bales in 2020-21, 16.7 
million in 2021-22 and 16.8 million in 2022-23. These baseline forecasts were 
compiled in November. 

   Meanwhile, mills boosted their unpriced on-call sales by 1,860 lots to a 
total of 106,907 during the week ended Jan. 18, according to delayed data 
reported by the Commodity Futures Trading Commission. This was the first 
increase in mill call sales after some rather hefty pricing over five 
consecutive weeks. 

   Producers added 1,181 lots to raise their unpriced position to 45,148 lots. 
The net call difference widened 679 lots to 61,759, 26.4% of the open interest. 
Prices during the reporting week ranged from 72.21 to 74.66 cents, basis March  
Last year, unpriced positions were 158,195 lots for mills and 31,294 lots for 
producers for a net call difference of 126,901 lots, 40.6% of the OI. 

   Separately, delayed CFTC traders-commitments data showed trend-following 
funds sold 1,306 lots during the week ended Jan. 15 to raise their net shorts 
to 13,707 lots in cotton futures-options combined. 

   Index funds sold 4,910 lots to reduce their net longs to 71,040 lots, while 
non-reportable traders sold a net 136 lots to shave their net longs to 1,157 
lots. Commercials bought 6,352 lots, covering 3,694 shorts and adding 2,658 
longs to cut their net shorts to 58,490 lots. Open interest expanded 7,965 lots 
to 289,358.  March ranged from 71.64 to 73.46 cents.

   In futures only, non-commercials pared their net longs to 6.6% of the OI 
from 7.3%. They added 1,323 shorts along with 251 longs, reducing their net 
longs 1,072 lots to 15,200. OI increased 7,057 lots to 231,064. 

   Back to the U.S. 2018 crop, upland classing slowed to 286,286 RB during the 
week ended Feb. 8, bringing the season's total to 16.041 million, 94% of the 
updated USDA production estimate and down 12.1% from 18.243 million RB a year 
ago when 93% of the final output had been graded. Tenderable cotton fell to 
49.3% for the week and 65.4% for the season.  


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