Weekly Cotton Comments 11/16 06:03
Trade Dispute, Demand Worries Weigh on Cotton
First notice day looms. Mills' unpriced on-call December sales declined to
14,125 lots. U.S. crop 54% harvested. Growers contracted 12% of their upland
acres. Outstanding upland loans rose to 1.325 million RB. Hedge funds cut net
longs 1,519 lots. India's cotton subsidies reported far more than allowed by
WTO. Mill use estimate reduced for China.
By Duane Howell
DTN Cotton Correspondent
Doubts about a quick resolution of the U.S.-China trade dispute amid worries
about cotton demand weighed on cotton futures.
Spot December lost 276 points to close at 76.25 cents for the marketing week
ended Thursday. It closed in the lower quarter of its 357-point trading range
from 79.19 on Nov. 5 to 75.62 cents on Tuesday, just 25 points from the Oct. 1
December closed right back below its 50-day moving average to start the
marketing week after a one-day stand above it and remained below it. Then a
sharp break and close below the prior-week low of 76.83 on Monday inspired
technically oriented bears. March fell 226 points to settle at 78.28 cents and
December 2019 shed 121 points to close at 77.75 cents.
With first notice day for December deliveries looming five trading sessions
ahead, stocks in deliverable position have grown 64,524 bales from a week ago
to 106,083. The December-March switch widened to a settlement premium on March
beyond full carry of 203 points.
Open interest fell 19,536 lots on the week to 246,054 coming into Thursday,
with December's down 53,921 lots to 40,665 and March's up 23,872 lots to
125,130. The big Goldman Sachs index fund scheduled roll forward of longs,
selling December and buying March, ended at midweek.
Cash online trading slowed to 5,510 bales from 7,100 bales on The Seam.
Prices fell to an average of 69.84 cents per pound from 73.28 cents, with daily
averages ranging between 71.60 and 67.89 cents. Loan values averaged 52.15
cents, ranging from 50.80 to 53.44 cents.
Mills' unpriced on-call sales based in December fell 4,006 lots to 14,125
during the week ended Nov. 9, data reported by the Commodity Futures Trading
Producers' unfixed position declined 1,345 lots to 13,848, narrowing the net
call difference 2,661 lots to 277. The difference was only 0.43% of the
declining open interest, down from 2.52%. Mills' share of the remaining
December OI rose to 21.8% from 15.6%.
Across the board, mills priced a net 151 lots to trim their total unpriced
sales to 133,894, which represented 53.4% of the declining OI, up from 50.3%.
On the crop scene, U.S. cotton harvesting progressed five percentage points
to 54% complete during the week ended last Sunday, USDA reported, widening lags
to nine points behind last year and seven points behind the five-year average.
Boll opening at 96% lagged two points behind last year and the average.
Only three of 15 reporting states showed bolls below 100% open: Texas (93%),
Kansas (97%) and California (98%). Growers had harvested 42% of the crop in
Texas, 11 points behind last year and six points behind average, and 61% in
Georgia, behind by six points and three points, respectively.
With more than half the crop harvested, USDA has ceased reporting conditions
nationally of cotton still in the field. In Texas, cotton rated good to
excellent was unchanged at 22 percent and poor to very poor dipped a point to
45 percent. Producers on the High Plains, who have much of the cotton still on
the stalk, were anxious to finish the harvest, but fields again were too wet
late in the reporting week.
Upland growers had contracted 12% of their acreage by Nov. 1, up from 10%
last year, the Agricultural Marketing Service cotton division reported.
Bookings included 24% in the Southeast, up from 14% a year ago; 18% in the
Mid-South, up from 15%; and 4 percent in the Southwest and West, down from 7%
and 6%, respectively. Those estimates don't include cotton consigned to
marketing organizations but do include cotton contracted with them.
Upland loans outstanding rose by 118,174 running bales to 1.325 million
during the week ended Nov. 5. Entries were 125,872 RB and repayments totaled
7,698 RB. Cotton under loan included 164,099 RB of Form A loans issued to
individual growers and 1.161 million of Form G issued to marketing cooperatives
or a loan servicing agent.
Meanwhile, trend-following funds reduced their net longs by 1,519 lots to
22,972 in cotton futures-options combined during the week ended Nov. 6,
according to the latest CFTC traders-commitments data.
The reduction stemmed mostly from the addition of new shorts, which rose by
1,265 lots to 23,810, rather than the liquidation of longs, which dipped 254
lots to 46,782. Those funds have reduced their net longs 14 consecutive weeks
to the smallest since Aug. 22, 2017.
Index funds hiked their net longs 377 lots to 80,508, while non-reportable
traders raised theirs 708 lots to 2,601. Commercials bought a net 433 lots,
adding 5,846 longs and covering 4,613 shorts, to shave their net shorts to
On the international front, India has paid out far more in cotton subsidies
than is allowed by the World Trade Organization, with actual payments "vastly
in excess" of what it had officially declared, Reuters quoted the United States
in a filing to the Geneva-based watchdog.
The filing, which covered the 2010-11 through 2016-17 marketing years, said
that India was allowed to pay up to 10% of the value of cotton production but
payments under the minimum price support program actually ranged from 53% to
The National Cotton Council hailed the U.S. action and also applauded the
U.S. Trade Representative's office and USDA for seeking transparency in
supports provided cotton producers in other countries. No country devotes more
area to cotton production than India.
The NCC thanked the administration for pushing for transparency to India's
support programs, which it said is important to understanding the wide-ranging
impact they have on global cotton and fiber markets.
Elsewhere, Beijing Cotton Outlook cut its November estimate of China's
2018-19 cotton consumption to the equivalent of 39.96 million statistical
bales, sources said. That compares with 42.5 million bales projected by USDA.
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