Howell: Volatile cotton market rebounds from big skid to post gain


Volatile cotton futures rebounded sharply to finish with a 3 percent gain for the week ended Thursday, a day after tumbling almost the daily limit and closing with the largest one-day percentage loss in 11 months.

Benchmark July advanced 245 points to close at 85.68 cents, back above its nine-day and 18-day moving averages but still below its 40-day and 50-day averages. Maturing May gained 250 points to 83.83 cents and December rose 119 points to 84.47 cents.

Traders will monitor the continuation gap after spot May expires on Wednesday. Spot futures finished April with a 3 percent monthly loss after a first-quarter jump of 18 percent.

Cash grower-to-business trading, inactive the prior week, resumed on a turnover of 2,506 bales. The cotton changed hands on prices averaging 78.67 cents and premiums of 25.44 cents over loan repayment rates.

July, down four calendar weeks in a row, posted four consecutive daily gains through Tuesday for a total of 452 points, but gave back all but 92 points in a 4.1 percent dive on Wednesday.

A midweek selloff in commodities and equities amid global growth worries sent cotton into a nosedive. Then robust U.S. export sales and shipments contributed to the largest one-day gain in July in six weeks.

The weekly sales-shipments data revived talk that USDA may raise its 2012-13 export forecast in its updated supply-demand estimates on May 10. The USDA also will issue its first official 2013-14 forecasts.

All-cotton export sales for delivery this season of 324,000 running bales during the week ended April 25, up from 245,000 the previous week and the largest in 15 weeks, boosted commitments to 12.576 million. Commitments widened the lead over sales a year ago to 975,800 bales and were within fewer than 100 RB of the USDA export forecast.

Upland net sales rose to 314,400 bales, up 32 percent from the previous week and 69 percent from the prior four-week average. Gross upland sales were 335,700 bales and cancellations were 21,300 bales.

The upland sales included 254,700 bales or 81 percent to China, 25,400 to Vietnam, 9,800 to Mexico, 9,300 to Taiwan and 7,600 to Indonesia. Options also were exercised to export 138,000 bales of U.S. cotton to China, reducing outstanding optional origin sales to 36,800.

Shipments of 379,700 bales, up from 350,700 the week before, lifted exports for the season to 9.688 million. Shipments widened the lead over the year-ago total to 1.594 million bales and reached 77 percent of the USDA estimate, against 71 percent of final exports at the corresponding point last season.

To achieve the USDA projection, shipments need to average roughly 224,800 running bales a week.

New-crop sales of 87,600 bales, compared with 32,900 the prior week, brought 2013-14 commitments to 1.457 million, up 349,000 bales from forward bookings a year ago.

On the U.S. crop scene, planting progress crawled four percentage points during the week ended April 28 to 14 percent planted, 11 percentage points behind last year and six points behind average.

The Far West is the only region ahead of a year ago and the five-year average at 65 percent and 80 percent planted in Arizona and California, respectively. The biggest lags are in the Delta. Growers had planted only 2 percent in Arkansas, against 20 percent on average, and none in Mississippi and Tennessee.

Wet, cool conditions have delayed progress in the Delta and Southeast and drought and cold have kept many planters parked in the Southwest.

Planting crept up only two points in Texas to 14 percent, also behind last year by 11 points the average by six points, and rose seven points to 10 percent in Georgia, behind 11 and two points, respectively.

Cotton prospects in Texas’ Lower Rio Grande Valley, source of the nation’s first new-crop supplies, point to one of the area’s smallest outputs on record, according to specialists at the Texas A&M AgriLife Research and Extension Center in Weslaco.

“To begin with, our estimations are that growers have planted only 80,000 acres of cotton,” Danielle Sekula, extension integrated pest management specialist, said in an extension report.

This compares with an average of 150,000 acres planted the last three years, she said, and 220,000 acres planted between 2004 and 2006. This year could rival 2009 when only 60,000 acres were planted, 77 percent of which were lost to drought, the report said.

“The lower acreage years, like this year, are mostly due to drought,” Sekula said. “But this year we also have a lack of irrigation water in reserves as well as higher market prices for alternative crops that growers switched to, like corn and grain sorghum.”

In Willacy County, home to a majority of dryland cotton fields, plants never emerged in some fields, Sekula said. Even in water districts in other counties where some water still is available, irrigated fields are showing slow growth, she said.

“A lack of rain, lack of irrigation water and mild winter that failed to kill off insect populations all point toward heavy insect pressures that will simply move from winter vegetables and other crops,” said Raul Villanueva, extension entomologist.

A South Texas shortfall and lagging planting progress in the Delta and Southeast could make early supplies — needed to bridge the gap to volume movement of new-crop cotton — both late and small.

Meanwhile, trend-following funds sold a net 1,114 lots in futures-options combined during the week ended April 23 to trim their net longs by 2.2 percent to 50,402 lots during the week ended April 23.

That was the smallest of three consecutive weeks of long liquidation. Index funds sold a net 136 lots to nudge their net longs down to 75,026, while small traders sold a net 2,431 lots to shave theirs to 7,559 lots.

Commercials bought a net 3,681 lots, covering 6,750 shorts and liquidating 3,070 longs to reduce their net shorts to 132,987 lots.