A record high in unpriced mill sales, yet another round of robust U.S. weekly export sales and speculator and fund buying helped to power cotton futures to new contract highs.
Spot March gained 340 points for the marketing week ended Thursday to close at 82.65 cents, finishing up the 300-point daily limit. It had snapped string of 10 calendar-week gains in a row on bearish daily and weekly reversals on Jan. 5 from a then new contract high of 80.05 cents.
But March rebounded to a contract high finish on Wednesday after two days of coiling, inside-range price action – its 66-point trading band on Tuesday was the tightest since Dec. 8 – and led Thursday’s upside explosion to close up 10.55 points or 14.6 percent from last month’s low.
May also finished up the daily limit and up 363 points for the week to close at 82.96 cents, while July – it missed a limit gain by a single point – advanced 331 points for the period to settle at 83 cents. New-crop December rose 68 points to 75.42 cents.
All this happened ahead of USDA’s supply-demand reports, which were scheduled for release on Friday.
Cash online sales quickened to a crop year high of 140,401 bales from the prior week’s 82,838 bales on The Seam. Prices rose to an average of 70.92 cents from 70.22 cents, reflecting an average of 21.43 cents over loan rates, up from 21.15 cents. Loan values averaged 49.49 cents, up from 49.07 cents. Daily average prices ranged from 67.13 to 73.26 cents.
Cotton from the Southwest dominated the turnover. Adverse weather hurt the region’s crop quality, which lowered the physical price. Fifty-nine percent met tenderable standards on cotton classed as of Jan. 4.
Grower-to-business sales capped the week on a one-day high for the season of 41,627 bales. The cotton sold for an average of 72.46 cents per pound. All those sales were from the Southwest, projected to produce a regional record 10.785 million bales – 52 percent of the U.S. upland crop.
All-cotton export sales of 281,200 running bales during the week ended Jan. 4 for shipment this season, up from 199,400 RB the previous week, boosted 2017-18 commitments to 11.532 million RB.
Commitments – outstanding sales of 7.832 million RB plus shipments – topped cumulative sales a year ago by 2.489 million RB, maintaining a lead of 28 percent, and were 80 percent of the USDA export forecast. A year ago, commitments were 62 percent of final 2016-17 exports.
All-cotton shipments quickened to a marketing year high of 290,100 RB, with upland shipments of 281,600 RB up 42 percent from the prior week and 16 percent from the four-week average. This brought exports for the season to 3.7 million RB.
Shipments narrowed the lag behind exports a year ago by 68,000 RB to 531,000 or 13 percent and amounted to about 26 percent of USDA’s December projection. Last year, shipments were about 29 percent of final exports.
To achieve the forecast, shipments need to average roughly 367,400 RB a week for the 29 weeks remaining in the marketing year, while weekly sales averaging approximately 97,400 RB would match the export estimate.
Sales of 92,900 RB for shipment next season hiked combined sales for both crop years to 374,100 RB, up from 292,600 the week before, and raised 2018-19 commitments to 1.366 million RB. New-crop commitments were about 2.4 times forward bookings a year ago of 570,600 RB.
India, the world’s largest cotton producer, has been the largest buyer three weeks in a row, purchasing 158,200 RB. This has prompted new speculation about the size and quality of its crop and stocks.
Earlier, unpriced mill on-call sales hit a new total all-time high of 154,288 lots (15.429 million bales), up 1,063 lots from a week earlier, traders learned from data released on the first day of the marketing week.
The holiday-delayed on-call data from the Commodity Futures Trading Commission showed producers priced a net 240 lots to trim their total unpriced position to 28,096 lots (a rounded 2.81 million bales).
This resulted in the net call difference widening 1,303 lots to 126,192 (12.619 million bales), which was 44.6 percent of the expanding futures open interest.
In spot March, which faces first notice day on Feb. 9, mills priced or rolled 2,704 lots to reduce their unfixed position there to 50,426 lots, while producers cut their open call position 904 lots to 7,454.
The net call difference of 42,972 lots, down 1,800 lots from a week earlier, represented 24.5 percent of March’s rising open interest. Unpriced mill sales outweighed those of producers by a ratio of 6.77:1.
Unpriced mill sales in the March, May and July contracts were 115,898 lots and the unfixed producer position was 11,418 lots. On-call contracts cannot be rolled from one crop year to the next, meaning prices must be fixed in all those months by first notice day for July on June 25.
Meanwhile, trend-following funds raised their net longs 1,218 lots to 99,537 in cotton futures-options combined during the holiday-pocked week ended Jan. 2, according to the latest CFTC traders-commitments data.
This was a new high since mid-May when spot July futures hit a contract high of 87.18 cents. Prices during the reporting week ranged from 77.25 to 79.45 cents, basis spot March. Index funds hiked their net longs 964 lots to 72,600, while traders with non-reportable positions trimmed theirs 512 lots to 4,928.
Commercials boosted their net shorts 1,671 lots to 177,076, adding 3,499 shorts along with 1,828 longs. Open interest for the holiday-shortened trading week expanded 11,293 lots to 345,066.
In futures only, non-commercials increased their net longs 1,732 lots to 106,554, adding 1,359 longs and covering 373 shorts. Their share of the open interest dipped to 37.6 percent from 38.2 percent. Open interest grew 8,398 lots to 283,001.
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 email@example.com.