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Weekly Cotton Comments                 02/23 07:36

   Cotton Tops Previous Two Weekly Highs in May

   March inverted over May. Lower 2018-19 cotton prices projected by USDA.  
Upland classing reached 18.48 million RB. About 93% of crop classed. Crop 
estimate debated. Selling by hedge funds slowed to 12,580 lots. Unpriced mill 
sales totaled 85,557 lots in old-crop contracts.

By Duane Howell
DTN Cotton Correspondent

   Mill fixations, slackened fund long liquidation selling followed by bouts of 
speculative short covering and talk of some fresh buying helped to propel 
cotton futures to marketing week gains. 

   Most-active May gained 270 points for the holiday-shortened trading week 
ended Thursday to close at 79.47 cents, trading within a 408-point range from 
76.47 to 80.52 cents. It hit the high on Wednesday, topping the prior two 
weekly highs on its highest intraday price since Feb. 1.

   May at the high had retraced about half (80.45) of the 801-point break from 
the contract high at 84.45 cents on Jan. 12 to the Feb. 15 low. 

   Maturing March jumped 513 points to settle at 80.54 cents, its highest close 
since Jan. 25.  July added 265 points to close at 80.41 cents and December, 
which posted a new contract high at 76.44 cents, gained 87 points to finish at 
76.36 cents. 

   March inverted over May, settling at a 107-point premium from a 136-point 
discount.  First-day delivery notices totaled 80 lots, all issued by Term 
Commodities, trading arm of Allenberg Cotton Co. The major stopper, INTL 
FCStone Securities, took 66 or 83%. 

   Cash online sales quickened to 82,341 bales from 41,391 bales on The Seam. 
Sales hit a five-week high. Prices rose to an average of 71.20 cents from 69.59 
cents, reflecting gains to 21.60 cents from 19.93 cents in premiums over loan 
rates. Loan values averaged 49.60 cents, little changed from 49.64 cents. Daily 
price averages ranged from 63.56 to 72.17 cents. 

   Looking ahead, USDA forecast U.S. cotton plantings this spring of 13.3 
million acres, up 5.5% from 12.61 million acres last year, at its Agricultural 
Outlook Forum in Arlington, Va.

   The projection is up from an earlier National Cotton Council survey that 
showed producer intentions of 13.08 million upland acres. The USDA projected 
the average 2018-19 farm price at price at 63 cents, down 8.7% from 69 cents 
estimated for this season. 

   Initial USDA projections put corn and soybeans plantings at 90 million acres 
each, almost unchanged from 90.167 million and 90.142 million, respectively, 
last year. All-wheat acres are forecast at 46.5 million, compared with 46.012 
million in 2017-18. 

   Farm price projections included $3.40 per bushel for corn and $9.25 per 
bushel for soybeans, compared with $3.30 and $9.30, respectively, estimated for 
2017-18. The wheat average farm price is forecast at $4.70 per bushel, up from 
$4.60 for 2017-18. 

   On the 2017-crop scene, U.S. upland cotton classing slowed to 236,832 
running bales during the week ended Feb. 15 from 324,825 RB the previous week, 
according to USDA tabulations coming into the marketing week. Analysts debated 
whether the crop will reach the production estimate. 

   Classing for the season rose to 18.48 million RB, up 17% from 15.811 million 
RB graded a year ago and roughly 92% of the USDA upland production estimate. A 
year ago, around 98% of the final upland output had been classed. 

   Tenderable cotton accounted for 44.4% of the classing run for the week and 
68.6% for the season, compared with 50.9% and 68.9%, respectively, the prior 
week. Seventy percent graded a year ago met tenderable requirements. Gins 
submitting upland samples for grading declined to 130 from 180 the week before 
and 534 for the season. 

   All-cotton classing of 19.13 million RB represented around 93% of the crop 
estimate and left something like 1.495 million RB still to be graded to achieve 
the forecast. End-of-season ginning figures, with an estimate of cotton left to 
be ginned, will be reported by USDA on March 8 and reviewed in the annual 
summary on May 10. 

   The two Texas High Plains classing offices graded 110,350 RB for the week, 
including 85,749 at Lubbock and 24,601 at Lamesa, and the Abilene facility 
classed an additional 80,694 RB from the Texas Rolling Plains, Oklahoma and 
Kansas. 

   That represented 81% of the U.S. upland classing for the week and hiked the 
season's total in the Southwest to 9.192 million RB, roughly 90% of the upland 
crop forecast for the region. 

   Most modules on the High Plains have been delivered to gin yards. The 
Lubbock classing facility reported that around 70% of the gins in its territory 
have completed operations for the season. Similar progress was reported at 
Lamesa. The Abilene office continued operating three shifts. 

   There were 39 gins still operating in the territory served by the Abilene 
office, 34 in the Lubbock region and 13 in the Lamesa area. 

   Meanwhile, selling by trend-following funds slowed to a net 12,580 lots in 
cotton futures options-combined during the week ended Feb. 13 from 16,480 lots 
the prior-week, reducing their net longs to 66,524 lots, data reported by the 
Commodity Futures Trading Commission showed. 

   Their long liquidation selling for three consecutive weeks has cut their net 
longs 48,596 lots or 57.8% from the record high of Jan. 23. They liquidated 
14,206 longs and covered 1,625 shorts during the latest reporting week, while 
index funds reduced their net longs 3,618 lots to 77,971 and non-reportable 
traders shaved theirs 174 lots to 5,981. 

   Commercials bought a net 9,136 lots, covering 23,739 shorts and liquidating 
14,603 longs to shave their net shorts to 150,475 lots. Open interest declined 
63,212 lots to 321,779. 

   In futures only, non-commercials sold a net 239 lots, liquidating 9,718 
longs and covering 9,479 shorts to nudge their net longs down 239 lots to 
84,692. They were net long 31.7% of the open interest, up from 29%. Open 
interest fell 26,923 lots to 266,641. 

   Separately, the latest CFTC on-call data available to traders during the 
marketing week showed mills with unpriced sales of 85,557 lots in the March, 
May and July contracts as of Feb. 9. Producers had an unfixed position of 
10,306 lots. The ratio of potential buying to potential selling was 8.3:1. 


(KA)

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