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Weekly Cotton Comments                 09/20 05:30

   Cotton Loses 3% to Finish Near Week's Low

   Gyrations in oil prices, Chinese farm visits drew attention. Sales and 
shipments stayed below the pace needed to achieve USDA's export estimate.  Crop 
ratings showed modest changes. Outstanding upland loans totaled 72,439 RB on 
the 2019 crop and 94,043 RB on the 2018 crop. Hedge funds bought a net 3,684 
lots as prices rose. Mills booked 1,108 lots on-call.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures finished with a 3% marketing week loss, initially hitting a 
new high for the move and then posting four consecutive lower highs and lower 
lows as the technical action turned sour. 

   Benchmark December lost 188 points to close at 60.33 cents for the week 
ended Thursday, just off the 60.28-cent low of the week's 311-point trading 
range. It closed back below its 50-day moving average on Wednesday and remained 
below it on Thursday's close, just above a key technical breakout point of the 
prior-week rally at 60.25. 

   The December-March straddle widened 36 points to a settlement difference of 
73 points of carry.  New-crop December dropped 61 points to settle at 64.04 
cents. 

   December 2019 hit a new high (63.39) since Aug. 1 last Friday but closed 
barely ahead for the day, added a slight closing gain on Monday and then 
settled lower three sessions in a row as U.S. weekly export sales and shipments 
remained below the pace needed to achieve USDA's downwardly revised projection. 

   Gyrations in crude oil prices after an attack last weekend on the oil 
facilities of Saudi Arabia, the world's largest oil exporter, kept cotton 
traders on edge much of the week. Cotton traders showed little reaction to 
another 25-basis-point cut in interest rates, as expected, to a fed-funds rate 
of between 1.75% and 2%.

   Traders kept an eye out for news on the resumption Thursday and Friday of 
meetings of U.S. and Chinese deputy trade negotiators aimed at laying the 
groundwork for high-level talks in early October. At least part of China's 
trade team will take some time to visit U.S. farms, DTN Ag Policy Editor Chris 
Clayton reported, quoting confirmation by Secretary of Agriculture Sonny Perdue.

   Futures volume slipped to an average of 31,168 lots per day from 48,504 
lots.  Open interest increased 1,361 lots to 230,791, with December's down 
5,650 lots to 136,776, March's up 6,526 lots to 59,027 and December 2020's up 
483 lots to 16,737. Certified stocks declined 1,089 bales to 11,185.     

   Cash online sales dipped to 10,263 bales on The Seam from 27,308 bales.  
Prices averaged 55.78 cents per pound, down 50 points, with daily averages 
ranging from 57.18 to 49.61 cents. Premiums over loan redemption rates averaged 
4.77 cents; daily averages ranged between 6.39 and 2.94 cents.  
Grower-to-business sales totaled 9,346 and 917 bales changed hands on the 
business-to-business platform. Offerings were 94,700 bales. 

   On the competitive-price front, the average of the five lowest-priced world 
growths for the Far East gained 234 points to 71.87 cents, according to USDA, 
while the lowest-quoted U.S. growth landed there gained 220-points to 71.20 
cents. The U.S. discount thus widened 14 points to 0.67 of a cent per pound. 

   With the adjusted world price rising to 54.62 cents and widening the gap 
above the base U.S. loan rate, marketing loan gains or loan deficiency payments 
remain at zero for the program week ahead. The gap between the AWP and the 
December futures close narrowed 422 points to 5.71 cents. 

   World prices as measured by the Cotlook A Index gained 60 points to 71.50 
cents as of Thursday morning ahead of the futures close. 

   The USDA rolled the basis for U.S. spot quotations from October to December 
ahead of first notice day for October next Wednesday. Only 123 lots remained 
open in thinly traded October coming into Thursday's session. Quotations on the 
base quality ended at 100 points "on" December in the Southeast, even in the 
Delta, 350 points off in the Southwest, 625 points off in the Desert Southwest 
and 575 points off in the San Joaquin Valley. Nationally, average spot quotes 
lost 78 points for the week to end at 57.76 cents on the base quality, 257 
points off December. 

   On the demand front, net all-cotton export sales for this season of 100,900 
RB during the week ended Sept. 12, up from 78,400 RB the prior week and about 
the same as 101,100 RB sold during the corresponding week last year, brought 
2019-20 commitments to 8.581 million RB. Commitments -- outstanding sales of 
7.107 million RB plus shipments -- were down 6.7% from total sales last year 
and were 54% of the USDA estimate. Commitments a year ago stood at 64% of final 
exports. 

   All-cotton sales need to average roughly 165,000 RB a week to match the new 
export forecast. Net upland sales of 85,000 RB reflected gross sales of 142,700 
RB and cancellations of 57,700 RB, including 39,300 RB by China. Sales went to 
15 countries, headed by Mexico, Pakistan, Costa Roca, Turkey and Vietnam. 

   Net sales for next season of 19,300 RB, up from only 500 RB the week before 
but down from 33,300 in forward sales a year ago, brought 2020-21 commitments 
to 681,100 RB.  Last year, forward bookings totaled 1.446 million RB. 

   All-cotton shipments of 173,800 RB, up from 171,500 RB the prior week and 
157,500 a year ago, raised exports for the season to 1.475 million RB, up 32% 
from last year. Exports were 9.2% of the updated USDA projection, compared with 
7.8% of final 2018-19 shipments a year ago. Shipments need to average roughly 
322,900 RB a week to make the estimate. Upland exports went to 18 countries, 
led by Vietnam, Indonesia, Mexico, China and India. 

   On the U.S. crop scene, conditions showed modest overall changes for the 
week ended Sunday, with good to excellent down two percentage points to 41% and 
poor to very poor also down a point to 17%, according to USDA's weekly 
conditions-progress report. Last year, good-excellent was 39% and poor-very 
poor was 32%. 

   Good-excellent dipped a point in Texas to 31% and poor-very poor remained at 
22%, compared with 22% and 49%, respectively, a year ago. In the wake of 
Hurricane Dorian, good-excellent dropped five points to 45% in North Carolina 
and poor-very poor declined three points to 22%. 

   Boll opening across the belt advanced 11 points to 54%, up six points from 
last year and seven points above the five-year average. Harvesting edged up two 
points to 9% completed, compared with 13% done last year and 8% on average.    

   Classing of 109,349 RB at Corpus Christi for the week ended Sept. 15 brought 
the season's total to 517,068 RB, 85% of which met tenderable requirements. A 
year ago, Corpus had classed 625,463 RB. A smattering also was classed in other 
states during the week. 

   Fields had begun to dry and fieldwork restarted in the Rio Grande Valley.  
Yields were reported around 2-1/2 to 3 bales per acre, affected by flooding in 
June and during the week of Sept. 2. Harvesting progressed in the Upper Coast, 
but spotty rainfall delayed operations in the Coastal Bend. Defoliants were 
applied in the northern Blackland Prairies and harvesting was underway. 

   Most areas in the Texas Plains got anywhere from a trace to 2 inches of 
rain. Some stripper harvesting had begun in dryland cotton on the Texas Plains, 
but most producers were expected to wait for a killing freeze to prepare the 
crop for once-over stripping. Irrigated cotton was reported loaded with bolls 
and maturing. 

   In its first report on 2019-crop loan activity, USDA reported outstanding 
upland loans of 72,439 RB as of Sept. 9, reflecting entries of 77,916 RB and 
repayments on 5,477 RB. All were Form G loans in Texas. 

   Upland 2018-crop loans outstanding declined 94,043 RB during the reporting 
week to 550,505 RB. Repayments were made on 88,791 RB and forfeitures of 5,252 
RB brought that total for the season to 7,899 RB. Upland cotton under loan 
included 163,415 RB of Form A issued to individual growers and 387,090 RB of 
Form G loans issued to marketing cooperatives or loan servicing agents. 

   Trading of 2018-crop loan equities was active in the Southwest and North 
Delta. Equities changed hands at 49.75 to 59.25 cents in East Texas, 47.75 to 
58 cents in West Texas and 57 to 59 cents in the Delta.

   Meanwhile, trend-following funds bought a net 3,684 lots in cotton 
futures-options combined to reduce their net shorts to 42,314 lots during the 
week ended Sept. 10, according to the latest traders-commitments data from the 
Commodity Futures Trading Commission. 

   They covered 3,748 shorts and liquidated 64 longs. This was the fourth time 
in the last five weeks they have cut their net shorts. Index funds bought a net 
1,875 lots to raise their net longs to 61,191 lots; non-reportable traders 
upped theirs 781 lots to 1,567. Commercials sold a net 6,340 lots, adding 8,100 
shorts and 1,762 longs to boost their net shorts to 20,445 lots. 

   Prices during the reporting week ranged from 57.84 to 59.86 cents, basis 
December, ended at the highest settlement since Aug. 21 and leaped two sessions 
later to within a tick of limit up. Combined open interest increased 5,940 lots 
to a delta-adjusted 297,063. 

   Separately, CFTC data showed mills bought 1,108 lots on-call to raise their 
total unpriced call sales to 95,202 lots last week, while producers added 1,260 
lots to boost their unpriced position to 77,929. This nudged the net call 
difference down 152 lots to 27,273, 11.7% of the OI. The unpriced mill position 
accounted for 40.8% of the expanding OI. 

   By comparison, mills a year ago had unpriced sales of 150,223 lots and the 
net call difference was 107,397 lots, making up 58.7% and 42% of the OI, 
respectively. 


(KR)

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