PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton futures lose ground amid new China worries
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LUBBOCKONLINE.COM - Howell: Cotton futures lose ground amid new China worries
Posted: January 10, 2016 - 12:00am
By Duane Howell
For A-J Media
Worries about the global economy amid tumbling world stock markets drove U.S. cotton futures to a 13-week low close on ramped-up volume last week.
Spot March lost 185 points for the week ended Thursday to close at 61.43 cents, its lowest finish since Oct. 2. Daily volumes climbed as high as an estimated 41,400 lots, largest since Nov. 16. New-crop December shed 175 points to settle at 62.97 cents.
Nosedives in Chinese equities and skids in China's yuan currency aroused fears about the health of the world's second-largest economy, spreading turmoil in markets around the world.
Cash online grower sales fell to 12,166 bales over the four-day trading week from 67,056 bales on The Seam. Prices slipped to an average of 56.35 cents from 59.57 cents, reflecting a decline to 8.19 cents from 10.85 cents in premiums over loan repayment rates. Daily average prices ranged from 55.43 to 57.09 cents.
With exports expected to account for 73 percent of the market offtake of U.S. cotton this season and 30 weeks left in the marketing year, slowed all-cotton sales of 92,200 running bales during the holiday-marked week ended Dec. 31 brought 2015-16 commitments to 5.266 million RB.
Paradoxically, China, which had booked only a fraction of the amount it had bought a year ago, returned as the leading buyer on upland purchases of 26,400 RB. Those were its largest U.S. buys this crop year. Commitments were 54 percent of the USDA forecast, compared with 70 percent of final 2014-15 shipments a year ago. Cumulative sales trailed year-ago bookings by 2.404 million RB or by 31 percent. Weekly sales averaging roughly 147,800 RB are required to match the export forecast.
All-cotton shipments of 172,200 RB, largest of the crop year for upland-Pima combined, boosted the season's total to 2.439 million RB, 89,000 RB behind exports a year ago.
Shipments amounted to 25 percent of the USDA forecast, compared with 23 percent of final shipments at the corresponding point last season. Exports need to average about 242,000 RB a week to reach the estimate.
Traders took note of a Reuters report that U.S. farmers are expected to increase cotton plantings in 2016 from their smallest acreage in more than three decades after fiber prices gained last year, outperforming the biggest commodities rout in years.
Producers in the world's top cotton exporter are expected to plant the fiber crop on 9.7 million acres, up 13 percent from 2015, according to the median of 14 estimates of traders and analysts.
That still is below recent historical averages as concerns linger about demand from top cotton consumer China where huge inventories have kept pressure on prices over the past two years, the Reuters report noted.
But after rising 5 percent in 2015, cotton was one of the few commodities to end the year higher, escaping the broad losses seen in the bellwether 19-component Thomson Reuters Core Commodity Index. The 2015 cotton price rise followed a 29 percent plunge in 2014.
The survey planting estimates ranged from 9 million to 11 million acres, up from 2015 plantings of 8.56 million acres.
An earlier survey of producers across the belt by Cotton Grower magazine showed intentions to plant cotton on 9.085 million acres, up 5 percent from last year.
The National Cotton Council is conducting its annual survey of early planting intentions and will report the results at its annual meeting on Saturday, Feb. 6, in Dallas.
Elsewhere, growers in the Southern Hemisphere may increase planted area by 1 percent in 2015-16 to 2.9 million hectares (one hectare equals 2.471 acres), according to the International Cotton Advisory Committee.
Cotton plantings in the Southern Hemisphere started in September 2015 and will continue through the start of 2016, ICAC noted.
The Southern Hemisphere crop usually accounts for 8 percent to 10 percent of total world production, but ICAC expects this share to increase to 11 percent this season, though the projected production of 11.49 million statistical bales would be down 2 percent.
On the U.S. crop scene, upland cotton classing slowed sharply to 190,578 RB during the week ended Dec. 31 from 773,902 RB the previous week, USDA figures showed. A snowstorm and blizzard in the Texas Plains disrupted sample hauling to classing offices for days. Holiday influences also affected receipts.
Classing for the season reached 10.489 million RB, down 22 percent from 13.466 million graded a year ago. Pima classing declined to 13,951 RB from the prior week's 19,051 RB, bringing the extra-long staple total for the season to 363,302 RB, down from the year-ago count of 480,722.
Cotton tenderable on U.S. futures fell to the lowest weekly reading of the season to 45.6 percent from 57.3 percent the previous week, dropping the 2015 crop total to 56 percent from 70.6 percent a year ago.
Eighty-six percent of the estimated upland crop had been classed, compared with 88 percent of the final 2014-15 output graded a year ago.
The USDA will issue updated U.S. production estimates on Tuesday as part of its world supply-demand forecasts. Some private estimates have ranged from a small cut up to a 300,000-bale reduction in USDA's all-cotton projection last month of 13.031 million. Cotton Outlook has cut its estimate to 12.871 million bales.
Meanwhile, trend-following funds reduced their net long position in U.S. cotton futures-options combined by 1,080 lots to 48,414 during the holiday-shortened trading week ended Dec. 29, according to traders-commitments data reported by the Commodity Futures Trading Commission.
They liquidated 1,622 longs and covered 542 shorts, cutting their net longs a second week. Index funds nudged their net longs up 226 lots to 61,858, while traders with non-reportable positions hiked theirs by 796 lots to 5,945. Commercials' net shorts eased a marginal 57 lots to 116,216 on the covering of 806 shorts and the liquidation of 749 longs.
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