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Weekly Cotton Comments                 06/26 04:59

   Cotton Edges Higher on Light Volume

   Export sales slipped; shipments on pace to make estimate. U.S. crop 
condition dipped; poor-very poor expanded to 40% in Texas. First bale harvested 
in Texas valley. Trade estimates put U.S. plantings down 4.3% from last year. 
Hedge funds whacked net longs down to only 552 lots.  Mills priced a total of 
1,134 lots. ELS inclusion sought in CFAP.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures edged higher in light, holiday-like trading for the marketing 
week ended Thursday, with most-active December up 18 points to 59.70 cents and 
maturing July up 64 points to 61.81 cents.

   December settled in the upper half of its 134-point range from 60.19 cents 
on inside-day trading last Friday to 58.85 cents on Tuesday when it tested its 
40-day moving average and, in a negative near-term technical signal, the 
nine-day MA crossed below the 18-day MA. It finished below its rising 18-day MA 
on Wednesday but closed back above it on Thursday.

   July, where a commercial stopper took all initial 171 delivery notices on 
Wednesday, extended its premium over December as wide as 369 points on Tuesday. 
For the week, the July-December inversion widened 46 points to settle at 211 

   The December-March spread narrowed eight points to close at 62 points of 
carry. Daily December-March spread volumes ranged from 2,264 lots last Friday 
to 1,116 lots on Thursday.

   Trading volumes averaged 17,132 lots per session, down from 27,524 the 
previous week; Thursday's turnover fell to a mere 12,669 lots, lowest of the 
year. Open interest coming into Thursday had declined 11,070 lots from a week 
ago to 158,981, with July's down 13,412 lots to 679, December's up 385 lots to 
115,206 and March's up 1,318 lots to 22,029. Cert stocks grew 8,008 bales to 
39,261, with 7,156 bales awaiting review.

   Cash online sales declined to 4,549 bales from 6,189 bales on The Seam.  
Prices increased to an average of 55.87 cents per pound from 52.66 cents, 
reflecting a rise in premiums over loan rates to 6.49 cents from 4.84 cents. 
Grower-to-business sales were 4,018 bales and business-to-business sales were 
531 bales. Offerings ranged mostly up to about 188,000 bales.

   On the competitive front, the average of the lowest-priced world 2019-20 
growths for the Far East gained 73 points to 66.85 cents, while the 
lowest-priced U.S. cotton landed there gained 70 points to 68.45 cents.  The 
U.S. premium thus narrowed three ticks to 1.60 cents.

   The adjusted world price, reflecting quality and transportation 
differentials, rose to 49.60 cents, resulting in the marketing loan gain for 
the program week beginning today falling to 2.40 cents.

   The market showed muted reaction as net U.S. all-cotton export sales for 
this season and next came in at 174,800 running bales for the week ended June 
18, down from 250,500 the prior week but up from two-crop sales of 125,800 a 
year ago. Sales for this season of 106,900 RB were up from 102,500 the week 
before and 77,200 last year, while new-crop sales of 67,900 RB were down from 
148,000 but up from 48,600, respectively.

   Upland net sales of 102,700 RB for 2019-20, down 23% from the four-week 
average, reflected gross sales of 109,300 and cancellations of 6,600. Sales 
went to seven countries, with China booking 95,800 and cancelling 6,600 for net 
buys of 94,500. For 2020-21, gross sales were 72,500 RB, with 36,500 and 33,400 
going to China and Vietnam, respectively, and offsetting reductions of 4,100 by 
Turkey and 600 by Indonesia.

   All-cotton 2019-20 commitments of 17.495 million RB -- outstanding sales of 
4.777 million RB plus shipments -- remained about 10% above cumulative sales a 
year ago and stood about 20% above the export estimate. Year-ago commitments 
were about 11% above final shipments.

   Commitments for 2020-21 of 3.278 million RB, 780,000 RB below forward 
bookings a year ago, amounted to 21% of the USDA export projection; new-crop 
sales last year were 28% of the current 2019-20 export estimate.

   All-cotton shipments dipped to 325,700 RB from 354,200 the previous week and 
339,700 a year ago but remained on pace with to a bit above the weekly average 
needed to achieve the forecast. Shipments for the season reached 12.718 million 
RB, 836,000 or 7% above year-ago exports and 87% of the projection.

   Upland shipments of 316,100 RB, down 9% from the prior week but up 10% from 
the four-week average, went to 22 countries, led by China, Vietnam, Turkey, 
Pakistan and Bangladesh. All-cotton shipments now need to average roughly 
305,000-315,000 RB a week to make the estimate.

   On the U.S. crop scene, cotton in good to excellent condition dipped three 
percentage points to 40% during the week ended Sunday, down from 50% a year 
ago, USDA data showed. Poor to very poor increased eight points to 25%, up from 
17% last year.

   Planting advanced seven points to 96% completed, up from 95% last year and 
even with the five-year average. Progress lagged the state averages by a point 
at 97% in Mississippi, eight points at 90% in Missouri, two points at 96% in 
North Carolina, three points at 87% in Oklahoma and four points at 98% in North 
Carolina and at 96% in Tennessee.

   Poor to very poor cotton in Texas increased 15 points to 40% and 
good-to-excellent fell seven points to 23%. The Texas crop index dropped nine 
points to 52, down from 63 last year. Squaring at 27% was up three points from 
last year and seven points above the five-year average, while boll setting at 
10% compared with 3% and 5%, respectively.

   While the federal crop insurance cotton planting deadline expired June 20 in 
the Texas Rolling Plains, Mike and Elizabeth England of Mercedes delivered the 
nation's first two bales of the 2020 crop from their farm in the Rio Grande 
Valley to the Ross Gin Co. on June 18. Dryland fields had reached cutout in the 
valley and irrigated cotton was blooming out the top but there also were fields 
with good boll loads.

   Hot, windy, dry conditions stressed dryland cotton on the High Plains.  
Producers at some northern points had to replant owing to poor stands and 
others replanted an alternative crop. Irrigated fields showed eight to nine 
true leaves and first-position squares in some good-looking cotton near 
Lubbock, but those were outnumbered by fields needing help.

   In addition to Texas, weekly crop ratings declined in Kansas, North and 
South Carolina and Oklahoma.

   Looking ahead, trade estimates compiled prior to the USDA update on 
Wednesday put U.S. all-cotton planted acres at an average of 13.153 million 
acres, down 4% from the March intentions of 13.703 million and 4.3% from 13.738 
million seeded last year. Trade estimates ranged from 12.5 million to 13.75 
million acres.

   On the money-flow front, trend-following funds sold a net 3,330 lots in 
cotton futures-options combined to whack their newly established net longs down 
to only 552 lots during the week ended June 16, according to the latest 
supplemental traders-commitments data reported by the Commodity Futures Trading 
Commission. They added 3,792 shorts and 462 longs.

   Index funds sold a net 1,100 lots to reduce their net longs to 61,280, while 
non-reportable traders sold 1,520 lots to cut theirs to 2,253. Commercials 
bought a net 5,951 lots, covering 14,676 shorts and liquidating 8,725 longs to 
lower their net shorts to 64,085. Combined, hedge funds and specs sold 4,850 
lots to drop their net longs to 2,805.

   Managed-money traders sold a net 3,568 lots, reducing their net longs to 
2,951, according to disaggregated data. They added 4,522 shorts and 954 longs.

   Prices during the reporting week ranged from 60.70 to 58.69 cents in spot 
July and 60.37 to 57.75 cents in most-active December. Combined open interest 
declined 34,157 lots to a delta adjusted 202,288.

   On-call data reported by the CFTC after the close Thursday showed mills 
priced a net board total of 1,134 lots last week to reduce their unpriced sales 
to 88,631, 53.6% of the OI, while producers priced 2,048 lots to lower their 
unfixed position to 49,071. The net call difference declined 914 lots to 
39,560, 23.9% of the OI.

   On the Washington scene, the National Cotton Council has requested that 
extra-long staple or Pima cotton be added as an eligible commodity in the 
Coronavirus Food Assistance Program. This is part of USDA's process to review 
and update the commodities eligible for CFAP.

   In a letter to USDA, NCC Chairman Kent Fountain noted that pandemic-forced 
shutdowns have led to a reduction in demand for ELS cotton, larger carryover 
stocks and higher storage and interest costs. Additionally, he said, buyers of 
previously contracted ELS cotton are looking to either cancel purchase or delay 
shipments for up to six months.

   Based on data published by the U.S. Census Bureau, ELS market prices, as 
measured by per-pound export values, declined by 8 cents or 7.2% between 
January and April, the letter said. The latest decline meets the 5% threshold 
established in the CFAP over the appropriate time frame.

   "The lack of support and inclusion in the CFAP has a disproportionate impact 
on ELS cotton as compared to upland producers," Fountain, a Surrency, Ga., 
ginner, said.

   Using a range of ELS spot quotes of 95 to $1.10 per pound, the average 
per-pound loss is 12 to 27 cents or $58 to $130 per bale. Applied to 2019 ELS 
production of 685,500 bales, the loss is calculated at $40 million to $90 

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