Weekly Cotton Comments 10/12 05:33
Cotton Gains Amid Lower World Stocks Forecast
Prior-year revisions cut USDA estimate of India's carryout. Second hurricane
in a month hits Southeast cotton. Early freeze forecast for Lubbock. U.S.
ending stocks estimate increased to 5 million bales. Crop 25% harvested.
Overall long liquidation selling continued. Mills priced 3,258 lots. Internal
crop estimate for India down from USDA forecast.
By Duane Howell
DTN Cotton Correspondent
A sharp cut in world ending stocks stemming largely from long-awaited USDA
revisions in India's balance sheet, the second hurricane to hit the Southeast
in a month and heavy rains and forecasts for an early freeze on the Texas
Plains helped to generate cotton futures gains.
December gained 81 points to close the marketing week ended Thursday at
76.81 cents. It finished in the lower half of its 189-point range, trading from
76 cents on Oct. 5 to 77.89 cents on Tuesday and remaining within the two-week
price span. March added 135 points to close at 78.17 cents and December 2019
finished up 72 points at 76.20 cents.
Cash online sales fell to 1,751 bales from 3,587 bales on The Seam. Prices
averaged 65.70 cents per pound, down from 70.95 cents. Daily averages ranged
from 62.89 cents on 447 bales to 73.63 cents on 56 bales. Loan redemption
values averaged 49.60 cents, down from 53.74 cents.
Heavy losses in U.S. equities amid rising Treasury yields to multi-year
highs, signaling a tightening of capital globally, and trade-related worries
helped to cap the rally amid concerns about cotton demand.
Crop loss estimates from Hurricane Michael were just being assimilated in
the Southeast after heavy rains fell on open bolls and spotty hailstorms
pounded cotton in the Lubbock area. Frost was reported in parts of the northern
High Plains Tuesday night. Adverse weather in wide areas of the belt has raised
fresh concerns about quality.
A low of 29 degrees is forecast for Monday night at Lubbock, ahead of the
average first freeze date of Oct. 31. While this could be of benefit where
cotton is being defoliated, significant acreage needs more time.
U.S. production prospects edged up 81,000 bales from last month to 19.76
million, USDA's monthly supply-demand report showed. Yields are projected at
906 pounds per acre, up six pounds from last month and the second highest on
record. Harvested area of 10.5 million acres is down 20,000 acres on the month
and 5% from last year.
Based on conditions around Oct. 1, higher production in Texas, up 200,000
bales on the month to 6.7 million, and Georgia, up 100,000 bales to 2.9
million, largely offset lower production in the Carolinas. The crop in the
six-state Southeast dropped 91,000 bales to 5.6 million.
In Texas, a 220,000-bale increase to 4.165 million on the High Plains and
scattered light increases in other districts more than offset net losses
elsewhere, mainly in South Texas.
Lower world trade and mill use resulted in a 200,000-bale cut to 15.5
million in the U.S. export estimate. With domestic mill use unchanged at 3.4
million bales, ending stocks rose by 300,000 bales to 5 million. The
stocks-to-use ratio of 26.5% rose from 24.6% foreseen last month to the highest
The USDA's forecast range for the crop year average farm price is 69 to 77
cents per pound, with the midpoint of 73 cents down two cents from last month's
projection. Prices last season averaged 68 cents.
Globally, ending stocks plunged 3.01 million bales from a month ago to 77.45
million, largely on a 2.9-million-bale cut in beginning stocks on the
prior-year revisions in India. Production fell 310,000 bales to 121.66 million
and mill use dipped 180,000 bales to 127.76 million. Ending stocks are forecast
down 6.4 million bales from last year, largely on an 8.15-million-bale decline
to 29.87 million in China.
U.S. harvesting advanced six percentage points to 25% completed during the
week ended last Sunday, a point ahead of last year and seven points above the
five-year average, USDA's progress report showed. Boll opening at 78% was up 11
points on the week, seven points from last year and four points from the
Crop ratings nationally were unchanged at 42% good to excellent and 25% poor
to very poor. Slight dips in seven states were offset by improvement in three
states and steady conditions in five states.
Classing increased to 298,989 running bales during the week ended Oct. 4 to
boost the season's total to 1.326 million RB, near the 1.333 million graded a
year ago. Tenderable cotton rose to 71.8% for the week and 64.3% for the
season, compared with 77.2% and 84.6%, respectively, last year.
Meanwhile, long liquidation selling by non-commercials continued on balance
during the week ended Sept. 25, though index funds turned buyers and
non-reportable traders -- mostly small specs -- flipped to net short.
Non-commercials sold 11,841 lots, liquidating 6,814 longs and adding 5,027
shorts to reduce their net longs to 59,256 lots, the latest cotton
futures-options traders-commitments legacy data from the Commodity Futures
Trading Commission showed.
Index funds increased their net longs by 1,180 lots to 78,855 and
non-reportable traders sold 1,977 lots to reverse to net short 272 lots from
net long 1,705 lots. Commercials bought 13,818 lots, adding 9,523 longs and
covering 4,295 shorts to drop their net shorts to 58,984 lots. Open interest
increased by 4,431 lots to 348,151.
Separately, CFTC on-call data showed mills priced 3,258 lots for the week
ended Oct. 5, reducing their total unpriced sales to 136,599 lots. Producers
added 696 lots to hike their total unpriced position to 45,083 lots. In spot
December, mills priced 3,369 lots to cut their unfixed position there to 24,614
and producers priced 901 lots to lower theirs to 18,703.
Back on the international scene, India's 2018-19 cotton output is likely to
fall 4.7% from the previous season to 34.8 million bales (of 170 kilos) as
scant rainfall and attacks by pink bollworms are expected to squeeze crop
yields, a trade body leader told Reuters.
That would translate into 27.19 million 480-pound bales, compared with
USDA's unchanged October forecast of 28.7 million bales. The drop could limit
exports from the world's largest cotton producer amid rising demand from China
and in turn offer support for global prices.
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