Howell: Fewer cotton acres, solid export demand help lift futures

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By Duane Howell

For the Avalanche-Journal

Confirmation of a sizable cut in prospective U.S. plantings and healthy weekly export sales helped to keep cotton futures in the plus column last week, though renewed profit-taking trimmed gains.

Spot May gained 117 points or 1.3 percent to finish the holiday-shortened trading week at 88.46 cents on Thursday, up 317 points or 3.7 percent for the month. The market posted a quarterly continuation gain of 18 percent, largest quarterly advance in two years.

May climbed to a six-session high to 90.27 cents, then fell 181 points to settle slightly above the middle of the week’s 376-point range ahead of Easter weekend. The market was closed on Good Friday.

The lead contract had skidded 781 points or 8.3 percent from nearly a one-year high on March 15 to Monday’s low, rebounded 415 points to Thursday’s high and closed still below its declining nine-day moving average and a narrow three ticks above its rising 18-day average.

July gained 154 points for the week to 89.81 cents and new-crop December rose 82 points to 87.73 cents.

Cash grower-to-business sales fell to 2,876 bales from 6,979 bales on The Seam. This was the lowest weekly volume since September as “free” supplies in growers’ hands continued to dwindle.

Prices averaged 81.01 cents, down from 84.74 cents, reflecting a decline to 28.10 cents from 32.62 cents in premiums over loan repayment rates. Daily price averages ranged from 79.55 to 83.36 cents.

Steep losses in grains and soybeans on the heels of bearish quarterly stocks data may have contributed to keeping the cotton rally in check.

All-cotton planting intentions total 10.026 million acres, down 19 percent from 12.315 million acres seeded last year, USDA reported. This is in line with average expectations of 10.08 million acres but several hundred thousand acres below the midpoint of most trade estimates based on recent gains in cotton prices.

Upland intentions are pegged at 9.820 million acres, down 18.7 percent from 12.077 million planted in 2012, and Pima acreage is projected at 206,000, down 13.6 percent from 238,400.

If realized, plantings in Arkansas, Louisiana, Mississippi, New Mexico and Oklahoma all will be record lows, USDA said. Intentions in top-producing but drought-troubled Texas are down 16 percent to 5.5 million acres, 56 percent of the U.S. upland acreage.

Growers in Georgia, the No. 2 cotton state, intend to nudge plantings up to 1.3 million acres from 1.29 million. The only other upland increase is a 7,000-acre hike to 115,000 in Florida.

By regions, upland acres declined 6.1 percent to 2.58 million in the Southeast, 37.9 percent to 1.26 million in the Mid-South, 17.4 percent to 5.7 million in the Southwest and 18.7 percent to 280,000 in the West.

The all-cotton acreage is about even with a USDA analytical forecast of 10 million at the Agricultural Outlook Forum in late February and up from the early National Cotton Council intentions survey of 9.015 million.

On the demand scene, net weekly export sales for shipment this season of 155,600 running bales hiked commitments to 11.46 million, 93 percent of the forecast. The report suggested prices haven’t rationed demand.

Shipments of 360,500 bales lifted the season’s total to 7.855 million, up 1.297 million or 20 percent from a year ago and 64 percent of the estimate.

New-crop sales of 99,200 bales boosted 2013-14 commitments to 1.219 million, widening the lead over forward sales a year ago to 399,000 bales. These commitments are 11 percent of the outlook forum forecast.

In end-of-season data, USDA said gins processed 16,832,900 running bales of 2012-crop cotton, up 11 percent from 15.153 million the prior year. Ginners estimated 16,358 bales would be ginned after the survey, compared with 66,087 bales last year. There were 671 active cotton gins for the 2012-crop year, against 682 the prior season.

In equivalent 480-pound net weight bales, the all-cotton total rose to 17,285,850 from 15.558 million the year before and USDA’s last 2012-crop forecast of 17.01 million bales. These figures are expected to be incorporated into USDA’s updated April supply-demand estimates.

In international news, China will continue to stockpile domestic cotton this year when the new crop hits the market, an official from the nation’s top economic planner said.

The government also may offer more from its reserves, which would include domestic and imported cotton from 2012, to meet textile mills’ demand starting in April. The size of the offerings wasn’t detailed.

A new purchase price will be announced soon, an official from the National Development and Reform Commission’s Economic and Trade Department told an industry conference, according to a transcript published on the China Cotton Association’s website.

China bought domestic cotton harvested in 2012 at 20,400 yuan ($3,284) a metric ton to support domestic prices. Market participants expect Beijing to maintain that price in this year’s stockpiling program.

Some mills which have bought cotton from the reserves now have received import quotas under the previously reported 3:1 ratio.

Back to futures, selling had intensified when the market posted its largest one-day loss on March 20 since late January.

This followed the latest traders-commitments data from the Commodity Futures Trading Commission showing trend-following funds bought 5,570 lots in futures-options combined during the week ended March 19 to boost their net longs by 7.3 percent to 81,751 lots.

The net longs held by those funds were the largest since the record high of 92,331 lots on Feb. 28, 2008. Index funds bought 943 lots to raise their net longs to 70,708, while small traders bought 1,158 lots to hike theirs to 15,972.

Commercials sold a net 7,671 lots to raise their net shorts to 168,430, adding 12,576 shorts along with 4,905 longs. In futures only, non-commercials shaved their net longs by 1.8 percentage points to 38.9 percent of the open interest.

Source: lubbockonline.com

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