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Weekly Cotton Comments                 06/22 05:04

   Escalating Trade Tensions Hammer Cotton

   Massive fund long liquidation erupted. Open interest fell sharply. Market 
little changed on U.S. weekly export sales. Hefty old-crop cancellations 
reported. New-crop upland sales climbed to seven-week high. U.S. crop continued 
to deteriorate. Non-commercials were net long 39.7%.   

By Duane Howell
DTN Cotton Correspondent

   A rapid escalation in U.S.-China trade tensions hammered cotton futures to 
steep marketing week losses. 

   December lost 8.67 points or 9.3% for the week ended Thursday to close at 
84.29 cents, posting six lower highs in a row. It collapsed 914 points the 
first three sessions and rallied 47 points the next two days, remaining below 
lows of the prior three weeks. 

   July, where the long-term trend turned down at midweek with the crossover 
back below the 60-day moving average, shed 1,020 points or 10.9 percent to 
settle at 83.21 cents, unchanged on the day at its lowest close since April 24. 
First notice day is Monday (corrected). 

   Massive fund long liquidation pounded prices to limit and near-limit daily 
losses after President Donald Trump threatened early in the week to slap a 10% 
tariff on $200 billion of Chinese goods and Beijing said it would fight back 
with "qualitative" and "quantitative" measures. 

   Open interest coming into Thursday had fallen 44,787 lots from a week 
earlier, with July's down 38,320 lots to 5,879 and December's down 10,343 lots 
to 196,540. Stocks in deliverable position grew 4,849 bales to 85,439, exchange 
data showed. 

   Cash online grower-to-business sales of 2,191 bales brought daily average 
prices ranging between 49.60 cents per pound and 62.74 cents. Staples 35 or 
more accounted for 1,844 bales or 84%. All the sales were from the Southwest.  

   The market finished little changed on the heels of the U.S. weekly export 
sales-shipments report on Thursday, with December up marginally, July flat and 
the rest of the board down fractionally. 

   Net all-cotton export sales for this season and next declined to a combined 
228,800 running bales for the week ended June 14 from 301,600 RB the prior week 
and 652,300 RB in the corresponding week last year. 

   Sales cancellations totaling a net 112,400 RB of upland and 200 RB of Pima 
for this season shaved all-cotton 2017-18 commitments to 16.821 million RB, 
still up 2.091 million RB or 14% from a year ago. The lead narrowed 290,000 RB.

   The net reduction in upland commitments reflected cancellations of 170,700 
RB and gross sales of 57,300 RB. Old-crop upland sales went to 13 countries, 
led by China (31,700 RB), Turkey, Thailand, Italy and Malaysia. Cancellations 
were primarily for Vietnam, Indonesia and Hong Kong.

   Net new-crop sales of 295,400 RB of upland -- a seven-week high -- and 
46,000 RB of Pima boosted 2018-19 commitments to 5.262 million RB, up 1.315 
million RB or 33% from a year ago and 35% of the USDA forecast. Year-ago 
forward bookings were 22% of the current 2017-18 export projection. 

   Eleven countries booked new-crop upland cotton, headed by China (211,700 
RB), Hong Kong and Mexico. Partially offsetting were reductions of 18,100 RB 
for Indonesia 500 RB for Honduras. 

   All-cotton shipments of 320,200 RB, down from 469,200 RB the prior week but 
up from 266,200 a year ago, brought exports for the season to 13.272 million, 
85% of the USDA estimate. Year-ago shipments were 87% of final 2016-17 exports. 

   Shipments now need to average roughly 335,500 RB a week over the six-plus 
weeks remaining in the marketing year to achieve the USDA estimate, which is up 
7% from last season and would be the second highest exports on record. 

   Prices during the reporting week ranged from the contract high of 96.50 to 
92.61 cents in July and from the contract high of 94.82 cents to 91.20 cents in 

   On the crop scene, U.S. ratings continued to deteriorate during the week 
ended last Sunday, with good to excellent falling four percentage points to 38% 
and poor to very poor rising five points to 26%, the USDA's weekly progress 
report showed. 

   Conditions a year ago were 61% good to excellent and 10% poor to very poor. 
The DTN cotton condition index, based on the USDA report, fell 15 points to 86, 
down from 158 last year. 

   Planting advanced six points to 96% completed, slightly ahead of 94% last 
year and the five-year average. Twenty-two percent was squaring, up from 15% 
the week before, 21% last year and 17% on average. 

   The Texas crop was 95% planted, up from 91% last year and 92% on average, 
with 18% squaring, up from 17% and 13%, respectively. Conditions deteriorated 
sharply as good-excellent fell seven points to 19% and poor-very poor rose 
eight points to 39%.

   Abandonment in Texas has remained a subject of much conjecture. John 
Robinson, cotton marketing specialist at Texas A&M University, has pointed out 
that high abandonment in the West Texas Plains is fairly common. Federal crop 
insurance deadlines have expired in both the High Plains and the adjoining 
Rolling Plains. 

   "Half the time over the last 12 years we have seen in Texas at least one in 
three planted acres not being harvested," Robinson said. 

   Some cotton in the more heavily irrigated northern High Plains that escaped 
earlier hail damage has been reported flourishing, while recent rains have been 
too late to help a lot of dryland fields. 

   Meanwhile, in futures only, non-commercials' net longs eased 0.3 of a 
percentage point to 39.7% of the open interest during the week ended June 12, 
according to traders-commitments data reported by the Commodity Futures Trading 

   They sold 3,453 lots, adding 3,062 shorts and liquidating 391 longs to pare 
their net longs to a still-large 122,946 lots ahead of the liquidation that 
followed when July lost ground six of seven sessions.

   By contrast, non-reportable traders -- mostly small speculators -- raised 
their net longs 2,270 lots to 14,978. Combined, non-commercial and 
non-reportable net longs dipped 1,183 lots to 137,924. Open interest fell 
10,937 lots to end that reporting week at 309,608 lots. 


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