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Weekly Cotton Comments                 11/17 05:13

   Cotton Recaptures Ground on Export Sales Surge

   Weekly sales reached highest since January 2015. Shipments remained slow, 
411,000 RB behind a year ago. Tempo of eventual rise in China's imports viewed 
as key to price reaction. U.S. crop 64% harvested. Hedge funds cut net longs 
5,695 lots. Mills added 6,032 lots to on-call sales.

By Duane Howell
DTN Cotton Correspondent

   A jump to a crop year high in U.S. weekly export sales helped cotton futures 
recapture marketing week ground -- plus some -- lost the prior week.

   December gained 92 points for the week ended Thursday to close at 69.21 
cents, back above its falling 50-day moving average and its highest finish 
since Oct. 25. It closed in the upper third of its 338-point, eight-week range 
from 70.22 to 66.84 cents ahead of first notice day on Nov. 24.

   Most-liquid and now also most-active March gained 64 points to settle at 
69.18 cents, a three-point discount to December. It hit a high of 69.63 cents 
on Monday, just below chart resistance at the prior-week high and two-month 
peak at 69.67 cents. March posted a double-low of 68.62 cents on Tuesday and 
Wednesday, above the prior-week's low at 68.34.

   Cash online grower-to-business sales quickened to 42,282 bales from 11,531 
bales on The Seam. Prices averaged 67.24 cents, up from 66.39 cents. Staples 35 
or more accounted for 37,626 bales or 89 percent of the turnover. System-wide 
sales, including business-to-business sales, climbed to 54,421 bales from 
39,223 bales. Daily average prices ranged from 65.70 to 68.61 cents.

   A strong weekly export sales report had been expected, but the robustness 
reported by USDA topped expectations. Slow weekly shipments may have helped to 
keep the rally in check.

   All-cotton sales for shipment this season jumped to 524,800 running bales, 
with upland sales of 506,700 RB ranking as the largest since Jan. 15, 2015 when 
sales were 546,200 RB. Prices during the reporting week traded within a 
147-point range from 68.01 to 69.48 cents, basis December.

   Commitments for 2017-18 rose to 9.434 million RB, widening the lead over 
cumulative sales a year ago to 2.648 million RB or 39%. Sales were 67% of the 
USDA export estimate, compared with 47% of final 2016-17 exports a year ago.

   Sales for shipment next season fell to only 200 RB from 31,200 RB. 
Commitments for 2018-19 of 917,000 RB still commanded a big lead over forward 
bookings of 450,600 RB last year.

   Shipments remained far behind the pace needed to achieve the export 
estimate, falling to 100,600 RB from 128,300 RB. Exports for the season of 
2.057 million RB were down 411,000 RB from a year ago and were 15% of the 
2017-18 projection, against 17% of final exports at the corresponding point 
last season.

   To achieve the USDA projection, shipments need to average roughly 324,600 RB 
a week, while weekly sales averaging approximately 125,200 RB would match the 
export forecast.

   Looking ahead, by reaching a new record for ending stocks outside China this 
crop year, the rest of the world is building a cushion against an eventual rise 
in Chinese imports, says Cotton Inc.

   The USDA trimmed its forecast for world stocks outside China by 1.7 million 
bales this month to 51.21 million, still 15% above the previous record of 44.2 
million bales in 2014-15.

   A key question for prices concerns the tempo of the expected rise in Chinese 
imports. If China feathers increases over several crop years, gradually lifting 
imports from the current level near 5 million bales to near the current 
production deficit of 14 million bales, acreage outside China would have time 
to respond to higher demand, CI says.

   But a sudden shift from current import levels to two to three times higher 
-- from 5 million to 14 million bales -- would be expected to provoke a more 
dramatic price reaction.

   Heavy global stocks of corn and soybeans could counter the effects of rising 
Chinese import demand on cotton prices. Because those crops can compete for 
cotton acreage, low corn and soybean prices resulting from high stocks could 
make it easier for cotton to maintain or increase acreage and production.

   "This support for cotton production will help offset the effects of an 
eventual increase in Chinese import demand," CI says.

   China ranks as the largest export buyer of U.S. cotton this season on 
purchases of 1.901 million bales, 20% of total 2017-18 commitments.

   On the U.S. crop scene, cotton harvesting advanced 10 percentage points to 
64% completed during the week ended last Sunday, four points ahead of last year 
and even with the five-year average.

   The pace picked up from eight points the prior week when the harvest was a 
point behind last year and the average, according to the USDA progress report.

   Texas harvesting moved at an 11-point clip to 55% completed, up from 41% 
last year and 53% on average.  The large bulk of the Texas cotton remaining on 
the stalk was in the High and Rolling Plains. Rising humidity halted late-night 
harvesting to keep excessive moisture from being stored in modules.

   Meanwhile, trend-following funds reduced their net longs 5,695 lots to 
44,347 in cotton futures-options combined during the week ended Nov. 7, data 
reported by the Commodity Futures Trading Commission showed.

   They added 4,266 shorts and liquidated 1,429 longs. Index funds hiked their 
net longs 919 lots to 69,909, while non-reportable traders raised their net 
shorts 369 lots to 1,745.

   Commercials bought 5,145 lots, covering 3,333 shorts and adding 1,812 longs 
to reduce their net shorts to 112,511 lots. Combined open interest rose by 
1,635 lots to 301,320.

   For the reporting week ended Nov. 10, three days beyond that for 
traders-commitments data and a day beyond the export sales reporting week, 
mills added a net 6,032 lots (603,200 bales) to their total on-call sales, a 
CFTC report showed.

   This boosted their unpriced on-call sales to a new all-time high of 147,500 
lots (14.75 million bales), the third record high in a row. Producers added 249 
lots, upping their unpriced position to 36,619 lots (3.662 million bales). The 
net call difference widened 5,783 lots to 110,881, 48.5 percent of the 
declining futures open interest.


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