Weekly Cotton Comments 03/22 05:22
Cotton Surges to Highest Close Since Dec. 19
May finished above highs of the prior 12 calendar weeks. Cash online trade
hit one-day crop year high on The Seam. Widespread spring flooding forecast.
Weekly export sales slowed to 147,100 RB; top buyer corrected to Vietnam.
Above-average exports expected in second half of 2018-19. Upland classing
reported 12.5% below a year ago. Hedge funds cut net shorts 1,269 lots. Mills
added 2,684 lots to unpriced on-call sales.
By Duane Howell
DTN Cotton Correspondent
Spot May cotton futures surged to the highest close since Dec. 19,
triggering buy-stops on the burst through the January high of 76.14 cents, as
traders digested forecasts calling for widespread spring flooding and weekly
export sales data coming in around the middle of the range of upland
May advanced 288 points for the marketing week ended Thursday to settle at
77.18 cents, in the upper quarter of its 354-point range from 74.28 to 77.82
cents. It also ignited technically oriented buying when it burst through
resistance at 76.50 cents, but it still finished below a year ago when the spot
May 2018 contract settled at 82.59 cents.
July gained 258 points to close at 78.03 cents, December rose 127 points to
75.33 cents and March added 103 points to 76.05 cents. Spread trading saw
May-July narrow 30 points to settle at 85 points carry, inverted July-December
gain 131 points on a close at 270 points, and December-March narrow 24 points
to finish at 72 points carry.
Volume averaged 31,430 lots a day, bolstered by 45,653 lots on Thursday,
largest in a single session since Feb. 21. Options volume jumped Thursday to
18,647 lots -- 15,631 calls and 3,016 puts. Futures open interest coming into
Thursday's session had gained 1,796 lots from a week ago to 223,461. Certified
stocks declined 4,411 bales to 106,796.
World prices as measured by the Cotlook A Index stood at 84.65 cents
Thursday morning ahead of the futures close, up modestly from 84.30 cents a
week earlier but down from 91.95 cents a year ago.
Cash online trading climbed to 85,107 bales on The Seam from 71,906 bales,
with a marketing year one-day high of 48,969 bales changing hands on Thursday
as May futures closed above highs of the previous 12 calendar weeks. Prices
averaged 67.81 cents per pound, up from 66.14 cents, with daily averages
ranging from 65.55 cents on March 15 to 69.17 cents on Thursday. Loan
redemption values averaged 51.92 cents, up from 51.34 cents, and ranged on
daily averages from 50.45 to 52.89 cents.
The online sales Thursday featured 48,541 bales on the grower-to-business
platform and 428 bales on the business-to-business exchange. All G2B and B2B
sales were from the Southwest. The grower sales brought an overall average of
69.25 cents and included 41,770 bales or 86% of staple 35 (1-3/32nds inches) or
On the weather front, nearly two-thirds of the lower 48 states face an
elevated risk for flooding through May, with the potential for major or
moderate flooding in 25 states, according to NOAA's U.S. spring outlook.
Portions of the country -- especially in the upper Mississippi and Missouri
River basins including Nebraska, Minnesota and Iowa -- already have experienced
record flooding this year, NOAA said.
Additional spring rain and melting snow will prolong and expand flooding,
especially in the central and southern U.S., forecasters said. As this excess
water flows downstream through the river basins, the flood threat will become
worse and geographically more widespread.
"The extensive flooding we've seen in the past two weeks will continue
through May and become more dire and may be exacerbated in the coming weeks as
the water flows downstream," Ed Clark, director of NOAA's National Water Center
in Tuscaloosa, Ala., said in the report. "This is shaping up to be a
potentially unprecedented flood season, with more than 200 million people at
risk for flooding in their communities."
On market demand, net U.S. all-cotton export sales for shipment this season
of 147,100 running bales during the week ended March 14, down from 195,400 RB
the prior week and 342,500 RB for the corresponding week last season, brought
2018-19 commitments to 12.93 million RB, USDA data showed.
Commitments -- outstanding sales of 6.227 million RB plus shipments --
amounted to 89% of the USDA export estimate, down from 96% of final 2017-18
exports a year ago, and were down 1.817 million RB or 12% from cumulative sales
Upland net sales of 125,000 RB, down from 166,100 RB the week before and
338,300 RB a year ago, went to 15 countries, led by Vietnam, 84,700 RB; Turkey,
21,500; India (currently ranked as the world's second largest cotton producer),
16,300; Pakistan, 10,300; and Bangladesh, 5,100.
The initial USDA report had shown China as the top buyer on the same amount
subsequently credited to Vietnam. All other figures and the countries involved
were unchanged. Net upland sales reflected gross sales 151,100 RB and
cancellations of 26,100 RB.
China's commitments dipped 11,600 RB as a combined 39,700 RB on cancellation
of 8,800 RB and 30,900 RB in outflow destination changes more than offset new
sales of 28,100 RB. Vietnam had new sales of 53,000 RB plus 31,800 RB in inflow
destination changes minus cancellation of 100 RB.
All-cotton shipments of 366,700 RB, up from 300,000 RB the prior week but
down from 432,500 RB a year ago, boosted exports for the season to 6.703
million RB. Shipments trailed year-ago exports by 745,000 RB or 12% and were
46% of the USDA estimate, down from 48% of final 2017-18 exports. Upland
shipments of 350,100 RB were the second highest of the marketing year, not
counting the unreported weeks when export figures weren't available because of
the partial government shutdown.
With the delayed harvest having limited supplies for export earlier this
season, above-average shipments during the second half of 2018-19 have been
expected. To achieve the forecast, shipments need to average roughly 413,000 RB
over the 19 weeks remaining in the crop year, while sales averaging
approximately 85,200 RB weekly would match the estimate.
Net sales for shipment next season of 33,800 RB, up from 24,700 RB the
previous week, brought 2019-20 commitments to 2.401 million RB, down 13% from
forward bookings a year ago of 2.759 million RB. New-crop commitments are 15%
of USDA's outlook forecast, against year-ago forward bookings of 19% the
current 2018-19 export estimate.
On the U.S. crop scene, classing of 81,888 running bales of upland during
the week ended March 14 brought the 2018-19 total to 16.726 million RB, down
12.5% from 19.115 million RB (corrected) graded through the corresponding
period last season. Tenderable cotton totaled 64.5% for the season, down from
67.7% a year ago.
Pima classing of 9,174 RB hiked the extra-long staple total to 774,447 RB,
up 14.9% from 673,770 last year. All-cotton classing reached 17.5 million RB,
down 11.6% from 19.788 million RB a year ago.
The USDA's all-cotton estimate this month of 18.39 million statistical
480-pound bales, down 12.4% from 20.923 million bales the previous year,
included 17.596 million of upland, down 13% from 20.223 million, and 794,000
bales of Pima, up 13.5% from 699,500.
Weekly upland classing came predominantly from Texas, 21,680; Arizona,
16,808; Oklahoma, 13,857; and Kansas, 11,907. Seven gins continued operating
this week in Oklahoma, where ginning was expected to conclude in April, and six
Producers plowed under some unharvested cotton in the Lower Southeast, while
a few gins remained on gin days in Georgia as they waited for the last modules
to arrive. Flood warnings remained in effect in the Delta. The Mississippi
River was flowing more than 7 feet above flood stage at Memphis and about 6
feet above at Greenville, Miss.; most tributaries also were overflowing their
Meanwhile, trend-following funds bought 1,269 lots to cut their net short
position to 21,979 lots in cotton futures-options combined during the week
ended March 12, according to the latest supplemental traders-commitments data
reported by the Commodity Futures Trading Commission.
Those funds covered 1,249 shorts and added 20 longs, reducing their net
shorts for the third consecutive week. Index funds reduced their net longs
3,006 lots to 70,678, while non-reportable traders trimmed theirs 326 lots to
Commercials bought a net 2,064 lots, adding 3,752 longs and 1,688 shorts to
push their net shorts down to 49,128 lots. Prices during the reporting week
ranged from 72.51 to 75 cents, basis May. Open interest edged up 114 lots to
In cotton futures only, non-commercials boosted their net longs to 3.1% from
2.1%. They covered 1,260 shorts and added 578 longs, raising their net longs
1,838 lots to 6,706. OI fell 2,294 lots to 220,996.
The disaggregated data showed managed-money traders boosted their net shorts
in cotton futures-options combined 1,705 lots to 20,007, mainly by liquidating
Separately, CFTC on-call data showed mills added 2,684 lots to lift their
total unpriced sales to 101,125 lots during the week ended March 15, while
producers priced 1,095 lots to cut their unfixed position to 50,806 lots. The
net call difference rose by 3,779 lots to 50,319, 22.8% of the rising OI, up
from 21.2%. Unpriced mill sales were 45.8% of the OI, up from 44.8%. A year
ago, mills had a record 160,636 lots in total unpriced sales, 43.7% of the also
rising and larger OI.
In the old-crop May and July contracts, mills priced a combined 196 lots,
trimming their unpriced sales there to 51,276 lots, outweighing the unpriced
producer position 3.1:1 and accounting for 33.1% of the OI. Last year, mills
had 80,084 lots in unpriced old-crop sales, topping the unfixed producer
position by a bulging 10.5:1 and making up 43.3% of the May-July OI.
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