PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton skids after hitting target, bounces ahead
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LUBBOCKONLINE.COM - Howell: Cotton skids after hitting target, bounces ahead
Posted: March 27, 2016 - 12:08am
By Duane Howell
For A-J Media
After achieving an overhead technical objective at the end of the prior program week, cotton futures fell to a sharp loss, quickly rebounded and finished ahead in the holiday-shortened trading week ended Thursday.
Spot May gained 56 points to settle at 57.72 cents, July rose 52 points to 57.58 cents and December added 45 points to 57.35 cents. The market was shuttered Friday in observance of Good Friday.
The May delivery hit a high of 58.89 cents on March 17, marking a 38.2 percent retracement (58.84) of the 11.27-cent move from the Dec. 9 high to the Feb. 29 contract low at 54.53 cents. It fell to a low of 56.82 cents the next session and posted double highs at 58.58 cents prior to the Easter break.
Cash online grower sales slid to 6,536 bales from 29,321 bales on The Seam. Prices fell to an average of 50.64 from 51.43 cents, reflecting a decline to 7.35 cents from 8.05 cents in premiums over loan repayment rates. Daily price averages ranged from 48.40 cents to 51.84 cents.
Traders tweaked some positions ahead of the U.S. prospective plantings report from USDA next Thursday.
All-cotton plantings are forecast at 9.459 million acres by Informa Economics, widely followed Memphis-based analytical firm, sources said.
This compares with 9.4 million acres projected by USDA at its Outlook Forum last month, up 820,000 acres, or nearly 10 percent, from last year and 300,000 acres, or 3 percent, above an earlier National Cotton Council survey. Other estimates have ranged as low as 8.8 million acres.
Expectations for a larger acreage have been attributed mainly to a return of area prevented from planting last season by excessively wet conditions as well as slightly more favorable prices for cotton against alternative crops.
Adverse weather prevented the planting of more than 500,000 acres intended for cotton in 2015. And while cotton prices have fallen from year-ago levels, prices for such alternative crops as corn, soybeans and sorghum also are lower.
Informa projected upland plantings at 9.28 million acres, up 10.2 percent from USDA's estimated 8.422 million acres for 2015.
The market finished moderately lower for the day Thursday, dented partly by disappointing U.S. weekly export sales.
All-cotton export sales for shipment this season of 92,900 running bales during the week ended March 17, down from 241,800 RB the previous week, brought 2015-16 commitments to 7.495 million RB.
The lag of commitments behind year-ago bookings widened by nearly 100,000 RB to 2.609 million RB, or to 26 percent. Commitments totaled 81 percent of USDA's export estimate, compared with 93 percent of final shipments a year ago.
All-cotton shipments of 220,000 RB, up from 186,100 RB the prior week, boosted the season's total to 4.535 million RB, widening the gap behind year-ago exports by 81,000 RB to 1.117 million RB, or to 20 percent.
Shipments were 49 percent of the USDA projection, compared with 52 percent of final 2014-15 exports at the corresponding point last season.
To achieve the USDA forecast, shipments need to average roughly 246,300 RB a week, while sales averaging approximately 90,500 RB would match the export projection.
Commitments for 2016-17 crossed the million-bale mark on sales of 52,100 RB, raising new-crop bookings to 1.047 million RB and widening the lead over cumulative forward sales a year ago to 145,000 RB.
The market showed little reaction to a report reiterating that China plans to restart auctions to sell off some of its huge cotton stockpile in the second half of April. Still unknown are such details as the volume, prices and quality.
Yin Jian, deputy director of China's National Development and Reform Commission, an economic planning and development agency, told The Wall Street Journal the auctions will begin by the middle or end of April.
China's cotton industry website cncotton.org earlier reported that Yin had said the agency plans to sell more high-quality cotton, including imported cotton. The website report was quoted as saying the agency intends to buy some high-quality cotton following the auctions.
On the crop scene, soil moisture has continued to diminish on the Texas High Plains. The USDA's weekly crop report rated topsoil moisture as short to very short in 67 percent and 64 percent of the northern and southern High Plains, respectively.
Precipitation at Lubbock has totaled only 0.59 of an inch since Jan. 1, compared with a normal of 2.19 inches and 2.51 inches last year. The total for the month is 0.20-inch, 0.59-inch below normal.
While the traditional optimum cotton planting period for the High Plains doesn't begin until May 5, weather lately — including strong winds and blowing dust — reminded that extreme conditions can threaten crops. A record high temperature at Lubbock on Tuesday of 87 degrees eclipsed the prior mark for the date of 86 degrees in the Dust Bowl era of 1935.
On the international scene, China's cotton imports totaled 56,231 metric tons (258,264 480-pound bales) in February and 153,812 tons (697,260 bales) in the first two months of 2016, down 65 percent and 53 percent from the comparable periods a year ago, respectively.
Imports the first seven months of the 2015-16 marketing year stood at approximately 586,000 metric tons, or around 2.691 million bales, about 54 percent of USDA's latest estimate of 5 million bales. The USDA estimate is down 40 percent from the prior-year imports and from 5.75 million bales foreseen at the beginning of this crop year in August.
Meanwhile, trend-following funds boosted their net short position by 3,952 lots to 40,488 lots — largest since at least 2006 — in cotton futures-options combined during the week ended March 15, while commercials reduced their net shorts by 3,028 lots to 24,694.
Commercials cut their net shorts to a new low since Jan. 27, 2015. Index funds raised their net longs by 1,103 lots to 68,820, while nonreportable traders nudged their net shorts up 180 lots to 3,638.
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