PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Volatility rules as cotton hits contract high, plunges
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LUBBOCKONLINE.COM - Howell: Volatility rules as cotton hits contract high, plunges
Posted September 15, 2017 02:52 pm
By Duane Howell
For A-J Media
Volatility ruled as cotton futures plunged to steep marketing week losses after hitting a new contract high.
December lost 515 points or 6.9 percent to finish the week ended Thursday at 69.12 cents. It touched a new contract high at 75.75 cents on Sept. 8 and fell to two 300-point daily limit moves in a row on the way to a low of 68.53 cents on Wednesday, a loss of 744 points or 9.8 percent, before stabilizing. December ended with nearly flat back-to-back closes.
Cash online trading slowed to 2,191 bales from 8,304 bales on The Seam. Prices fell to an average of 68.93 cents, reflecting a decline to 19.03 cents from 20.29 cents in average premiums over loan values. Daily price averages ranged from 72.10 to 62.50 cents.
Uncertainties about the impact of two hurricanes on the quantity and quality of the U.S. crop offered support after USDA's bearish crop and supply-demand estimates on Tuesday had slammed December to a limit-down close on the heels of a limit-down move the prior day.
Suspected scale-down mill price fixations, tight nearby supplies amid storm disruptions and a shortage of high grades also lent support. Unpriced mill on-call sales coming into the calendar week reached a new record high of 131,053 lots (13.105 million bales), outweighing unfixed producer positions of 38,435 lots by 92,618 lots.
U.S. cotton production prospects grew 1.21 million bales last month to 21.76 million, up 27 percent from last season.
The crop estimates didn't fully reflect damage from Hurricanes Irma in the Southeast and Harvey in Texas, USDA said. Acres for harvest will be reviewed in Texas and Louisiana for the October report along with crops affected by Irma in Alabama, Florida, Georgia and South Carolina.
All-cotton acres were raised 560,000 to 12.62 million planted and 460,000 to 11.51 million for harvest, lifting abandonment 100,000 acres to 1.11 million or a fractional increase to 8.8 percent.
Notable production increases were seen in the Southwest and Delta, up 855,000 bales to 10.485 million and 440,000 bales to 4.44 million, respectively. The prospective Texas crop jumped 500,000 bales to a record 9.3 million, up from 8.1 million bales last year.
Upland crop prospects declined 85,000 bales from a month ago to 5.155 million in the Southeast and rose by 1,000 bales to 951,000 in the West. U.S. upland production is forecast at 21.031 million bales, up 1.256 million from last month.
All-cotton yields are expected to average a record high 908 pounds per acre, up 16 pounds from last month, 41 pounds from last year and 69 pounds from the five-year average.
In Texas, the High Plains crop, unaffected by Harvey, is projected at a record 5.695 million bales, up from the prior mark of 5.677 million in 2005 and 11 percent from 2016. The adjoining Rolling Plains crop is forecast at 1.145 million bales, down from 1.244 million last year, for a combined output of 6.84 million bales, 73 percent of the Texas production and 32 percent of the U.S. upland crop.
Georgia, the nation's second largest cotton producer, bore the brunt of cotton damage by Irma. Its crop, which was 51 percent open as of last Sunday, was estimated at 2.7 million bales off a yield of 1,031 pounds, up from last year's 2.18 million bales and 898 pounds.
Ending stocks climbed 200,000 bales from last month to 6 million, 33 percent of total use. Export prospects rose by 700,000 bales to 14.9 million, while domestic mill use remained at 3.35 million bales. Beginning stocks were revised down 50,000 bales to 2.75 million.
Globally, with slightly lower beginning stocks and slightly higher use only slightly offsetting a 3.44-million-bale jump to 120.75 million in production, ending stocks rose by 2.45 million bales to 92.54 million.
Production rose for several countries, led by the United States and a million-bale increase to 30 million for India. Crop prospects also rose for Brazil, Australia, Mexico and Turkey.
World trade was revised upward by 600,000 bales to 37.8 million. Ending stocks, though up 3.3 percent from a year ago, are essentially unchanged as a share of consumption at 78.6 percent.
Ending world stocks outside China are expected to grow 11.92 million bales from beginning inventories to 53.07 million. China's carryover is projected to decline 8.95 million bales to 39.47 million.
Meanwhile, U.S. weekly crop conditions declined, with good to excellent down two percentage points to 63 percent, USDA reported.
That's up from 47 percent a year ago. The DTN cotton condition index, based on the USDA report, declined two points to 154, up from 120 last year. Boll opening at 34 percent lagged six points behind the five-year average, while 9 percent was harvested, up from 4 percent on average.
In Texas, good to excellent cotton fell four points to 55 percent, up from 40 percent last year. Twenty-six percent was open, down from 29 percent on average, while 16 percent was harvested, up from 8 percent.
On the demand front, export sales for 2017-18 fell to 69,000 running bales during the week ended Sept. 7 – a period when prices surged – from 119,100 the prior week.
This brought commitments to 7.037 million RB, narrowing the lead over total sales a year ago by 79,000 RB to 2.046 million or to 41 percent. Commitments were 49 percent of the new export forecast, compared with 34 percent of final 2016-17 shipments a year ago.
Sales for next season slipped to 26,400 RB from 43,100 RB, bringing 2018-19 commitments to 679,700 RB, still up 265,000 RB from forward bookings last year.
Shipments slowed to 112,200 RB from 167,800. Exports for the season of 984,600 RB were 112,100 RB or 10 percent behind a year ago. Shipments need to average roughly 292,800 RB a week to reach the estimate, while weekly sales averaging around 161,200 RB would match the export forecast.
Duane Howell is retired farm editor of The Avalanche-Journal. He writes daily cotton market reports for DTN/Progressive Farmer. His e-mail address is duane.howell at sbcglobal.net.
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