PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton futures extend rally to near marketing year high

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Fri Feb 3 17:22:09 CST 2017

LUBBOCKONLINE.COM - Howell: Cotton futures extend rally to near marketing year high


Posted February 3, 2017 02:15 pm 
By Duane Howell 
For A-J Media

Higher closes three sessions in a row and six of the last seven have lifted cotton futures to near a high for the marketing year as open interest rose to within striking distance of the largest ever.

Spot March gained 272 points for the week ended Thursday to close at 76.91 cents. It traded within a 334-point range from 74.06 on Monday to 77.40 cents on Thursday, 60 points from its high on Aug. 5 at 78 cents. That was the highest spot futures price since July 1, 2014.

May advanced 287 points to 77.57 cents, July rose 293 points to 78.18 cents and December added 213 points to 73.59 cents. The inverted July-December intercrop straddle traded to a new high of 591 points before narrowing to a settlement difference of 459 points.

Volumes increased daily, mushrooming to a huge 69,012 lots on Thursday. Open interest also surged, rising 19,101 lots from a week earlier to 287,747 heading into Thursday’s session, not far from the record high of 302,683 lots on March 3, 2008.

Stocks in deliverable position grew to 194,718 bales, largest since July 23, 2014 and up from 127,255 bales a week ago. First notice day for March is Feb. 22, and those not wanting to take or make delivery must have exited the front contract by then. March options expire Feb. 10.

Cash online grower sales declined to 96,954 bales from 113,552 bales on The Seam. Prices rose to an average of 70.57 cents from 69.42 cents, reflecting gains to 17.16 cents from 15.75 cents in premiums over loan repayment rates. Daily average prices ranged from 69.52 to 72.45 cents.

Another round of strong U.S. weekly export sales and a jump in shipments came amid expectations in some quarters for an increase in the 2016-17 export forecast in USDA’s supply-demand report next Thursday.

Net all-cotton export sales for shipment this season of 335,400 running bales during the week ended Jan. 26 brought 2016-17 commitments to 10.194 million RB. Upland sales of 328,700 RB were up 8 percent from the four-week average.

Commitments were up 4.104 million RB or 67 percent from cumulative sales a year ago. Total sales reached 84 percent of the USDA estimate, compared with 69 percent of final 2015-16 shipments at the corresponding point last year.

All-cotton shipments quickened to 360,500 RB, boosting the season’s total to 5.071 million RB. The lead over year-ago exports widened 116,000 RB to nearly 2 million RB. Upland shipments of 354,483 RB, up 55 percent from the four-week average, were the largest since April 30, 2015.

Exports were 42 percent of the USDA forecast. A year ago, shipments were 35 percent of final exports. To achieve the estimate, shipments need to average roughly 271,300 RB a week, while sales averaging about 74,300 RB weekly would match the export forecast.

Sales for 2017-18 jumped to 89,000 RB, largest new-crop bookings since the current marketing year began. Commitments for 2017-18 rose to 701,700 RB, still behind year-ago forward sales of 834,900 RB.

On the international scene, Cotton Outlook’s latest estimates foresee a smaller 2016-17 global crop shortfall than USDA’s January forecasts.

Converted to 480-pound bales from metric tons, world 2016-17 cotton production now is projected at 104.04 million by Cotton Outlook and consumption at 109.74 million. The production shortfall would narrow to 5.7 million bales from 14.22 million last season.

The USDA’s forecasts were 105.34 million bales for production and 111.76 million bales for mill use, with the crop shortfall projected to narrow to 6.42 million bales from 14.79 million.

The market has advanced in the face of what were considered bearish USDA January supply-demand estimates, including an unexpectedly large jump in U.S. production to 16.96 million bales.

If USDA follows previous procedure, it won’t update the U.S. crop estimate until after the end-of-season ginning report in March. Final revisions in acreage, yield and production will be released in May.

On the Texas crop scene, the cotton harvest was 97 percent completed as of last Sunday, even with a year ago but behind the five-year average of 99 percent, according to USDA’s regional field office in Austin.

Subsoil moisture was adequate to surplus in 87 percent of the northern High Plains, 40 percent in the southern district and 71 percent statewide, with topsoil moisture at 94 percent, 52 percent and 74 percent, respectively.

Nationally, upland classing slowed to 402,595 running bales during the week ended Jan. 26. This raised the total for the season to 14.975 million RB, 94 percent of the USDA upland crop forecast, and compared with 11.695 million RB graded a year ago when 97 percent of the final crop had been classed.

Meanwhile, trend-following funds reduced their net longs in cotton futures-options combined 4,202 lots to 99,708 in the week ended Jan. 24, while index funds raised theirs 2,172 lots to 65,276 and non-reportable traders – mostly small specs – boosted theirs by 1,253 lots to 10,939.

Commercials reduced their net shorts 777 lots or 0.4 percent to 175,920, according to data reported by the Commodity Futures Trading Commission. They covered 904 shorts to cut those to 223,643 lots and liquidated 127 longs to shave those to 47,723 lots.

Managed-money funds increased their futures-options net longs by a net 2,706 lots to 87,381, adding 3,327 longs and 621 shorts. In futures only, non-commercials reduced their net longs 3,736 lots to 108,195.

Separately, CFTC on-call data showed mills priced 3,070 lots in March and producers priced 233 lots during the week ended Jan. 27, reducing their unfixed positions there to 32,383 and 3,807 lots, respectively.

But mills added 3,684 lots in May and July, likely indicating some rolling from March, while producers added only 15 lots. The net call difference in March declined 2,837 lots to 28,576, which was 18.43 percent of the open interest. The unpriced March mill position outweighed that of producers by a ratio of 8.48:1.

Duane Howell is retired farm editor of The Avalanche-Journal. His e-mail address is duane.howell at sbcglobal.net.
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