PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton hits skids after climbing to 8-week high

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Tue Oct 27 17:56:09 CDT 2015

LUBBOCKONLINE.COM - Howell: Cotton hits skids after climbing to 8-week high


Posted: October 25, 2015 - 7:54pm
By Duane Howell	
For A-J Media

Concerns about a growing tightness of higher qualities lifted cotton futures to an eight-week high last week amid heavy rains on open bolls in the Texas High Plains and elsewhere in the nation's top fiber-crop state.

But then spot December reversed to finish with a weekly 133-point loss to 62.52 cents on Thursday, settling below lows of the previous six sessions at its lowest close since Oct. 12. December had posted a high earlier Thursday at 64.69 cents, its highest price since Oct. 25.

Forecasts for clearing skies in the High Plains contributed to the reversal along with profit-taking, a surge in the U.S. dollar index and overheated technical readings.

Cash grower sales slipped to 6,690 bales from 7,177 bales on The Seam. Prices averaged 59.20 cents, up from 57.61 cents, reflecting premiums over loan repayment rates of 11.38 cents, down from 12.62 cents. Daily average prices ranged from 55.67 to 59.85 cents.

Cotton is at its highest inherent quality when the bolls first open, crop specialists have pointed out. Standing alone, single rain events after that frequently aren't too harmful, depending upon intensity and duration and whether accompanied by strong winds and/or hail, but the cumulative effects of "weathering" mount over time.

Bolls were open on 92 percent of the Texas crop as of Oct. 18, according to USDA's weekly progress report, compared with 87 percent a week earlier, 77 percent a year ago and the five-year average of 89 percent. Twenty-eight percent was harvested, up from 24 percent the week before, 22 percent last year and 25 percent on average.

U.S. harvesting advanced nine percentage points to 31 percent complete as conditions again slipped. The harvest moved three percentage points ahead of last year's pace and a point ahead of the five-year average. Boll opening reached 94 percent, up from 89 percent a week earlier, 85 percent a year ago and 89 percent on average.

Forty-six percent was rated good to excellent, down a point from last week, and 16 percent was poor to very poor, up a point. A year ago, good-excellent accounted for 47 percent and poor-very poor 19 percent. The DTN condition index dropped five points to 118, compared with 113 a year ago.

U.S. upland cotton classing increased to 397,751 bales during the week ended Oct. 15 from 239,056 bales the previous week, boosting the total for the season to 1,209,189 running bales.

Classing of 2015-crop cotton amounted to 61.5 percent of the 1,965,601 bales graded for the season a year ago. The total was 9.7 percent of the upland crop estimate, compared with 12.9 percent of the final output graded at the corresponding point last season.

Cotton tenderable on futures totaled 51.8 percent for the week, against 52.3 percent the previous week, and 57.9 percent for the season. A year ago, tenderable cotton classed for the season was 74.8 percent.

Classing on the High Plains, expected to produce 70 percent of the Texas crop and 31 percent of the U.S. upland output, totaled 57,840 bales, including 20,138 at Lubbock and 37,702 at Lamesa.

Harvesting had slowly expanded in the West Texas Plains as fields dried following rains the prior week. Growers applied boll openers and defoliants in some areas, motivated by dryland yields. More gins began operations; others planned to open later in October or early November.

Prices for secondary products, including cottonseed, encouraged some producers to plan for additional returns. Cottonseed prices were reported at $210 to $250 per ton. Bulk cattle feeds consume a lot of byproducts.

Organic producers are waiting on a killing freeze to prepare the crop for harvesting. Organic cottonseed prices were reported at $700 to $730 per ton and will be used exclusively for organic dairy cattle feeds.

On the demand scene, U.S. export sales for shipment this season increased to 104,000 running bales during the week ended Oct. 15 from the prior week's disappointing 70,600 bales. Commitments rose to 3.585 running bales, narrowing the gap behind sales a year ago by 21,000 bales to 2.121 million.

Shipments remained on the low side at 65,500 running bales, down from 74,700 bales the week before. This brought exports for the season to 1,172 million, up 141,000 from a year ago. Exports were nearly 12 percent of the USDA estimate, compared with over 9 percent a year ago.

Sales averaging approximately 150,200 running bales a week are required to match the USDA export estimate, while shipments need to average around 207,600 bales.

On the competitive pricing front, the average of the five lowest-priced world cottons for the Far East rose by 167 points in the week ended Thursday, according to USDA calculations, while the lowest-priced U.S. growth landed there increased by 135 points to 74.40 cents.

The spread thus narrowed 32 points to 6.28 cents. The adjusted world price for this program week is 48.37 cents, USDA announced, up from last week's 46.70 cents. This resulted in a corresponding decline to 3.63 cents from 5.30 cents in the marketing loan gain.

With the AWP firming and loan deficiency or producer option payments declining, growers have sought compensation by holding out for higher prices or higher equities on their loan cotton. This had contributed to the recent market rally.

For qualities better than 31-3-35 (middling, leaf 3, staple 1-3/32nds inches), the fine count adjustment for 2015-crop cotton for this program week is 92 points, up from 38 points.

Meanwhile, trend-following funds boosted their net longs by 10,771 lots to 29,726 in futures-options combined during the week ended Oct. 13, government data showed. They covered 7,220 shorts and added 3,551 longs.

Index funds pared their net longs by 1,019 lots to 65,375, while traders with nonreportable positions reduced their net short position by 1,179 lots to 1,408. Commercials boosted their net shorts by 10,930 lots to 93,693, adding 6,598 shorts and liquidating 4,332 longs.

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