PCG EMAIL SERVICES: LUBBOCKONLINE.COM - Howell: Cotton plunges to lowest price since April 25
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LUBBOCKONLINE.COM - Howell: Cotton plunges to lowest price since April 25
Posted Sep 24, 2018 at 4:14 PM
by Duane Howell
Escalation of the U.S.-China trade dispute between the world's two largest economies and the largest cotton exporter and cotton consumer, respectively, hammered cotton futures to a 22-week low.
December lost 304 points for the marketing week ended Thursday to close at 78.47 cents, trading within a 448-point range from 82.38 on Monday to 77.90 cents on Wednesday, lowest since April 25. It reversed on Monday from above the prior-day high to close below that prior-day low.
Cash online trading quickened to 3,016 bales on The Seam as prices rose to an average of 76.26 cents. Staples 35 and longer accounted for 2,951 bales or 97.8 percent of the turnover. Premiums over loan rates climbed to an average of 21.26 cents.
World values as measured by the Cotlook A Index shed 385 points to 88.30 as of early Thursday, down from around 98 cents in early August. The U.S. cash basis on the base quality narrowed 25 points to 50 points off October in the Southeast and 125 points off in the Delta. It widened 50 points to 600 off in South Texas and was unchanged elsewhere.
President Trump announced new tariffs on $200 billion in Chinese goods, with a 10 percent tax set to go into effect Monday and rise to 25 percent at the end of 2018. China's commerce ministry responded with an additional $60 billion of tariffs on U.S. goods, prompting Trump to reiterate a threat to kick in a new $257 billion.
Technically, the plunge through the 80.60 to 81.20 support area of the last month represented a downside breakout, with that area now regarded as near-term resistance, analysts said. Monday's high of 82.38 is viewed as another resistance area ahead of key resistance at the 84.25 high of Aug. 29. Chart support is seen at 77.90, 77.50 and 76.24.
The market ended on an inside-day range on the heels of data showing net U.S. all-cotton export sales of 134,400 running bales for this season and next during the week ended Sept. 13, up from 105,200 RB the prior week but down from 335,200 RB in the corresponding week last season.
Sales included 101,100 RB for this season, up from 87,500 RB the week before and down from 278,400 RB a year ago, and 33,300 RB for next season, up from 17,700 RB and down from 56,800 RB, respectively. Current-crop sales were at the low end of expectations.
Shipments of 157,600 RB, up from 138,500 RB the previous week but down from 181,300 last year, boosted exports for the season to 1.118 million RB. The lag behind exports a year ago widened to 4 percent.
On the U.S. crop scene, conditions improved marginally during the week ended last Sunday, USDA's progress report indicated, even as Hurricane Florence lashed the Southeast and torrential rains fell in South Texas. However, traders said, USDA hadn't had time to fully assess the crop impact in those areas. Quality could be affected as well as yields.
Cotton in good to excellent condition inched up a percentage point to 39 percent nationally and poor to very poor dipped two points to 32 percent. Boll opening reached 49 percent, up three points from the five-year average, and harvesting at 13 percent was seven points above average.
In North Carolina, which bore the crop brunt of Florence, good-excellent cotton fell 14 points to 48 percent and poor-very poor increased six points to 19 percent. Fifty-nine percent of the bolls were open, five points ahead of average, and only 1 percent had been harvested.
In Texas, harvesting at 22 percent completed topped the average by 10 points and boll opening at 37 percent by two points. Statewide crop ratings showed good-excellent up four points on the week to 22 percent and poor-very poor down three points to 49 percent.
Classing edged up to 133,214 RB at Corpus Christi during the week ended Sept. 13, boosting the U.S. total for the season to 632,572 RB, nearly all of which came from Texas. Tenderable cotton totaled 66.6 percent for the week and 57.6 percent for the season. Last year, U.S. classing amounted to 760,260 RB and 88.9 percent was tenderable.
The price break found speculators and funds still with significant net longs, rendering the market vulnerable to their long liquidation when it took out support levels.
Trend-following funds sold 1,112 lots during the week ended Sept. 11 to reduce their net longs to 60,946 lots, according to the latest trader-commitments data reported by the Commodity Futures Trading Commission.
They liquidated 1,018 longs and added 94 shorts, cutting their net longs for six weeks in a row and the 12th in the last 13 weeks. Their net longs have fallen 49,325 lots or 44.2 percent from the second highest on record on June 5. Index funds raised their net longs 398 lots to 80,315, while non-reportable traders pared theirs 208 lots to 4,454.
Commercials trimmed their net shorts 922 lots to 145,715, adding 3,815 longs along with 2,893 shorts. Open interest increased 6,831 lots to 347,843. Prices during the reporting week ranged from 81.20 to 83.93 cents, basis December.
In futures only, non-commercials' net longs edged up 97 lots to 86,911 but dropped 0.3 of a point to 33.9 percent of the OI, which rose by 2,988 lots to 256,456.
Separately, CFTC on-call data showed mills priced 1,109 lots in December during the week ended Sept. 14, reducing their outstanding sales to 36,040 lots. Producers priced 769 lots to cut their unfixed position to 19,602 lots. The net call difference dipped 340 lots to 16,438, a little changed 11.4 percent of the declining open interest.
Overall, mills added a modest 522 lots, lifting their total unpriced position to 150,223, while producers priced 658 lots, cutting theirs to 42,830. This hiked the net call difference 1,180 lots to 107,393, 42 percent of the OI. Outstanding mill sales hit a record high of 164,837 lots on May 18.
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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