Weekly Cotton Comments 09/10 05:33
Cotton Closes Little Changed After Surge
Traders awaited delayed export sales and monthly supply-demand updates. U.S.
crop ratings fell, led by Texas; boll setting at 94% and boll opening at 29%.
Weekly Corpus recap showed 179,934 bales classed, lagging last year's 305,442
bales. Hedge funds net bought a light 204 lots. Mills boosted unfixed call
sales to 152,563 lots.
DTN Contributing Cotton Analyst
Cotton futures surged to the highest intraday price since Aug. 18 and pulled
back to close down seven ticks or 0.08% at 93.22 cents in benchmark December
for the holiday-shortened marketing week ended Thursday.
December settled in the lower reaches of the week's 2.16-cent range from
93.01 cents last Friday to a 14-session high at 95.17 cents on Wednesday,
second highest since the contract high at 96.71 cents on Aug. 17. It broke
through nearby resistance at 94.98 cents but remained below that on a closing
The inverted December-March spread widened 0.16 cent to settle at 0.81 cent,
while the inverted March-May spread narrowed 0.26 cent to close at 0.31 cent
after dropping to a double low at 0.25 cent Wednesday and Thursday, lowest
since July 2. December 2022 fell 0.72 cent to finish at 82.26 cents.
Near December surged to the high on the heels of an abrupt decline in USDA's
weekly U.S. crop conditions report, led by Texas. But the market couldn't hold
those gains as traders focused on positioning for Friday's delayed weekly
Export Sales report and the ensuing, eagerly awaited monthly supply-demand
In outside markets, the Dow Jones Industrial Average lost 151.69 points to
close at 36,879.38, its fourth straight day of losses, amid uncertainty on
what's next with the Delta variant, the economic reopening and the Federal
Reserve. All three major stock market averages were headed for calendar week
Cotton volume remained subdued on an estimated average of 24,600 lots per
session, up from 23,300 lots the prior week. Open interest coming into Thursday
had increased 6,023 lots to 273,891, with December's down 313 lots to 152,408,
March's up 3,530 to 66,620, May's up 1,978 lots to 19,808 and July's up 503
lots to 14,841. Cert stocks fell 4,047 bales to 64,455.
Cash online sales for the four-day trading week dipped to 3,586 bales on The
Seam from 3,883 bales. Prices eased seven ticks to an average of 91.69 cents,
reflecting a 0.48-cent gain to 38.45 cents in average premiums over loan
values. Grower-to-business sales were 1,463 bales and business-to-business
sales were 2,123 bales.
On the competitive front, the average of the five lowest-priced world
growths for the Far East gained 0.60 cent to 101.29 cents, while the
lowest-priced U.S. growth landed there gained 0.66 cent to 103.85 cents. The
U.S. premium thus widened six ticks to 2.56 cents. The adjusted world price
rose to 80.11 cents. The fine count adjustment is 0.41 cent for 2021-crop
qualities better than color grade 31, leaf 3, staple 35.
World values as measured by the Cotlook A Index at midweek stood at 104.65
cents, up 1.50 cents from a week earlier, leaving the international basis
unchanged from a week earlier at 9.62 cents over the prior-day December close.
The current 2021-22 season-average A Index price forecast of the International
Cotton Advisory Committee ranges between 76 cents to 126 cents with a midpoint
at 98.20 cents.
On the U.S. crop scene, cotton rated good to excellent fell 9 percentage
points to 61% and poor to very poor increased a point to 7% during the week
ended Sunday, up 16 points and down 20 points, respectively, from a year ago,
according to USDA reports.
Boll setting advanced eight points to 94%, down two points from last year
and three points below the five-year average, while boll opening also increased
eight points and lagged by seven and five points, respectively.
Crop ratings in Texas showed good to excellent down 14 points to 54% and
poor to very poor up two points to 9%, compared with 29% and 42%, respectively,
a year ago. The statewide good to excellent dropped three points below the
10-year average. Cotton setting bolls rose by 11 points to 94%, down three
points from last year and five points from the five-year average; boll opening
progressed six points to 28%, down 10 points and three points, respectively.
Most of Texas got from trace amounts to 2 inches of rain. Some areas in the
western Trans-Pecos received up to 6 inches and parts of the Upper Coast up to
4 inches. Hot weather sped fiber development on irrigated cotton in the
northern High Plains as the need for rain increased on dryland crops in parts
of the southern Plains, sources indicated.
Scattered showers brought beneficial rain to some areas of the Plains, but
other producers hoped for another shower or two to help plants retain fruit
loads. Plant growth regulators were applied in the northern Plains and the
first open bolls were reported in the southern Plains.
The last effective bloom date was nearing or had passed, depending upon
location. Irrigation was shut down in northern areas but continued in areas
south of Lubbock. Typically, producers expect to get some rainfall to assist
the boll-filling process after irrigation is halted.
Rainfall temporarily slowed harvesting in the Rio Grande Valley, Coastal
Bend and Upper Coast. Gins continued processing modules on gin yards.
Harvesting had passed the halfway mark in the valley, but later-planted fields
were negatively impacted by rainfall. Some producers completed harvesting and
were encouraged by the quality and yields nearing 2,000 pounds per acre. The
stalk destruction deadline was extended through Sept. 10.
Bolls were popping open in the Blackland Prairies. Producers prepared to
apply defoliants in about a week to 10 days in the southern counties and fields
were sprayed in the northern counties.
Classing at Corpus Christi of 95,356 bales at Corpus Christi during the week
ended Sept. 2 brought the season's total to 179,934 bales, compared with
305,442 bales graded through the corresponding period last year. Tenderable
cotton totaled 87.2%, down from 93.7% last year. Additional classing of some
75,600 bales through midweek hiked the season's total to about 255,500 bales.
On the money-flow front, hedge funds net bought a light 204 lots during the
week ended Aug. 31, covering 791 shorts and liquidating 587 longs to reduce
their net longs to 82,645, according to the latest trader-commitments report of
the Commodity Futures Trading Commission.
Index funds bought 1,769 lots to increase their net longs to 88,610,
covering 1,435 shorts and adding 330 longs, while non-reportable traders --
mostly speculators -- sold 104 lots to nudge theirs up to 10,678.
Commercials sold 1,870 lots to raise their net shorts to 181,932, largest
since June 2018, on the addition of 1,075 shorts and the liquidation of 795
longs. They were net short 55.9% of the combined open interest.
Prices during the reporting week spanned a 2.58-cent range from 94.93 cents
to 92.35 cents, basis December. Combined open interest dipped 394 lots to a
delta-adjusted 325,693, slipping a second week after having reached the largest
since early November 2018.
After the close Thursday, CFTC data showed mills bought a total of 2,965
lots on-call last week to raise their unpriced sales to 155,528 lots, 56.8% of
the futures open interest and near the record high of 156,505 lots in early
Producers added 1,529 lots to boost their unfixed position to 42,170 lots.
Increases in March, July and December 2023 more than offset scattered fixations
elsewhere, including 554 lots in December 2022. The net call difference
declined 1,436 lots to 113,358, 41.4% of the OI.
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