PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton slips amid emerging-market demand jitters
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LUBBOCKONLINE.COM - Howell: Cotton slips amid emerging-market demand jitters
By Duane Howell / For A-J Media
Updated Sep 10, 2018 at 5:34 PM
Cotton futures lost marketing week ground as an index of 24 emerging-market countries teetered near bear territory and stirred demand jitters.
December dropped 96 points to settle at 81.30 cents for the week ended Thursday, its lowest close since Aug. 15 and second lowest since May 16. March fell 90 points to finish at 81.73 cents and December 2019 lost 81 points to 77.27 cents.
December 2018 spent the holiday-shortened trading period within a 182-point range, from a high of 83.04 on Tuesday to a low of 81.22 cents on Thursday. Its follow-through on Thursday to a weak close the prior day pushed December to the lower trend line of a bearish flag chart pattern, a veteran cotton trader said.
Cash online sales dwindled to 608 bales from 2,873 bales on The Seam. Prices averaged a gross 74.17 cents per pound, with daily averages ranging from 65 cents to 76.41 cents. Premiums over loan redemption rates averaged a gross 23.77 cents.
A collapse of emerging-market currencies, triggered partly last month by sharp declines in the Turkish lira, which has fallen by more than 40 percent this year, contributed to concerns about consumer spending in those countries. Talk circulated of cancellations by Turkey of some purchases of Brazilian cotton.
Turkey is the ninth largest export buying destination of U.S. cotton this season. In Indonesia, which ranks as the fourth largest U.S. cotton export market, the rupiah has traded around two-decade lows.
Cotton futures moved lower in the face of a decline in U.S. weekly crop conditions and concerns about possible lint discoloration and boll rot after remnants of Hurricane Gordon doused parts of the Mid-South and Southeast. Beneficial rains in the Texas Plains may have mitigated some of those concerns.
U.S. cotton rated good to excellent declined three percentage points to 41 percent and poor to very poor increased two points to 33 percent during the week ended last Sunday, USDA's progress report showed. A year ago, good-excellent was 65 percent and poor-very poor was 11 percent.
Conditions deteriorated in the two largest producing states. In Texas, good-excellent cotton fell six points to 21 percent and poor-very poor rose seven points to 53 percent. In Georgia, G-Ex dropped five points to 64 percent and P-VP edged up a point to 8 percent.
Beltwide, boll opening rose eight points from a week earlier to 29 percent, up three points from the five-year average, and boll setting increased five points to 96 percent, even with average.
Open bolls exposed to the storm totaled 55 percent in Mississippi and 75 percent in Louisiana, up from 32 percent and 69 percent on average, respectively, and 41 percent in Alabama, up from 28 percent.
Eleven percent of the Texas crop was off the stalk, three points ahead of the five-year average. Harvesting neared an end in the Rio Grande Valley as the Sept. 1 deadline for stalk destruction approached, according to the Pest Cast newsletter. Yields varied widely. Producers reported per-acre yields of 650 to 1,500 pounds from irrigated fields and 350 to 500 pounds off dryland cotton.
The Corpus Christi classing office graded 110,364 running bales during the week ended Aug. 30, of which 60.3 percent met tenderable requirements. Of the 393,260 RB classed for the season at Corpus (386,151) and Abilene (7,109), 51.6 percent was tenderable.
Meanwhile, mills boosted their total unpriced on-call sales by 2,019 lots to 149,476 during the week ended Aug. 31, according to data reported by the Commodity Futures Trading Commission after the close Thursday.
Producers added 307 lots to lift their unpriced position to 44,257 lots, widening the net call difference by 1,712 lots to 105,219, which was 41.5 percent of the increasing futures open interest of 253,417 lots. Mills came into the reporting week having priced a combined total of 11,506 lots the previous two weeks.
Last year, unpriced lots totaled 127,442 lots for mills and 39,314 for producers, reflecting a net difference of 88,128 lots, 38.3 percent of the also then-rising open interest of 229,877 lots.
Separately, CFTC data showed funds and non-reportable traders reduced their net longs by 1,335 lots to 151,806 in cotton futures-options combined during the week ended Aug. 28.
Trend-following funds sold 2,592 lots, liquidating 1,615 longs and adding 977 shorts, to cut their net longs to 66,113 lots, their fourth consecutive weekly reduction and the 11th in the last 12 weeks. Index funds nudged their net longs up 312 lots to 79,947 and non-reportable traders hiked theirs 945 lots – mainly by covering shorts – to 5,746.
Commercials added 2,043 longs and 708 shorts. Open interest inched up 161 lots to 337,242. December gained a slight 33 points for the reporting week, closing at 83.58 cents.
On the international scene, Brazil could become the world's second-largest cotton exporter in 2018-19, jumping ahead of India, Reuters reported, quoting Brazilian trade group Abrapa at an industry event.
The group projected Brazil's exports at 1.12 million metric tons (5.14 million 480-pound bales), which would rank it second only to the United States. This would compare with USDA's forecast last month of 5.3 million bales, up from 4.18 million bales last season.
Globally, ending stocks are expected to fall to 16.91 million tons (77.66 million bales) in 2018-19 from 18.74 million tons (86.07 million bales) in 2017-18, says the International Cotton Advisory Committee. The forecast is down from ICAC's August estimate of 17.71 million tons (81.34 million bales).
Converted to statistical bales, the ICAC's September forecasts are for mill use of 127.68 million in 2018-19 to exceed crop output of 119.32 million by 8.36 million, compared with USDA's shortfall projection last month of 7.09 million on consumption of 127.62 million and production of 120.53 million. Updated USDA estimates will be released on Wednesday.
Duane Howell is retired farm editor of The Avalanche-Journal. He also writes cotton market reports for DTN/Progressive Farmer. His e-mail address is duane.howell at sbcglobal.net.
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