Howell: Cotton prices advance on light dealings as inversion widens

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Tight U.S. supplies ahead of movement of the late new crop of uncertain size have continued to contribute to underlying support as cotton futures posted gains amid a widened inversion and thin dealings.

Benchmark December gained 114 points for the week ended Thursday to close at 85.99 cents, still confined to a sideways trend but with some rising intraday lows. It widened its settlement premium to March by 26 points to 173, widest since June 27 when the spread closed at 174 points.

Selling dried up on dips below 85 cents, basis December, with light scale-down commercial buying offering support within the week’s tight range — set Tuesday — from 86.55-84.60. Daily volumes averaged only about 12,100 lots, against an average for the year thus far of 28,200 lots.

A continued decline in deliverable stocks, though mostly expected, may have contributed to support. Certificated stocks slid a sharp 284,249 bales for the week to 233,883, lowest since February.

The market rallied from an initial dip attributed to speculative selling after USDA reported slowed U.S. old-crop export sales and shipments for the week ended July 18.

But net combined all-cotton sales for shipment this season and next climbed to 137,600 running bales from 100,600 bales the previous week.

Net upland sales of 33,900 bales for 2012-13 were down 33 percent from the previous week and 22 percent from the prior four-week average. Gross upland sales were 37,100 bales and cancellations were 3,200 bales. This marketing year ends Wednesday, July 31.

Upland net sales for 2013-14 rose to 100,200 bales from 45,400 bales the week before. These were primarily for Turkey, 21,300 bales; Mexico, 14,700; and China, 12,400.

All-cotton shipments declined to 131,700 bales from 139,800 bales the previous week. Upland shipments of 120,900 bales were down 6 percent from the previous week and 17 percent from the prior four-week average.

Outstanding 2012-13 sales slipped to 1.169 million running bales, which at the current slowed weekly export pace would be shipped by around the middle of September.

Shipments for the season reached 12.425 million running bales, up 1.451 million from a year ago and about 96 percent of USDA’s July estimate. A year ago, shipments were about 97 percent of final exports.

With 13 days left in the marketing year, roughly 476,000 running bales remained to be shipped to reach the USDA estimate.

On the U.S. crop scene, conditions improved slightly during the week ended July 21, with excellent steady at 10 percent, good up two percentage points to 34 percent and poor down two points at 14 percent, according to USDA’s weekly progress report.

Fair and very poor were unchanged at 32 percent and 10 percent, respectively. The DTN cotton condition index rose to 94 from 90 a week ago but was down from 116 a year ago.

The Texas crop improved only marginally, even on the heels of widespread soaking rains. The report showed excellent up a point to 4 percent, good down a point to 22 percent, fair up a point to 36 percent, poor down two points to 21 percent and very poor up a point to 17 percent. The DTN index for Texas nudged up to 37 from 35 a week earlier.

Conditions also improved in Alabama, Arkansas, Mississippi, Oklahoma and Tennessee; declined in Arizona, Georgia, Kansas, North Carolina, South Carolina and Virginia; and held steady in California, Louisiana and Missouri. Georgia’s good to excellent cotton unexpectedly fell eight points to 55 percent.

Squaring advanced eight points to 77 percent, 11 points behind a year ago and six points behind the five-year average, while cotton setting bolls expanded 10 points to 27 percent, down from 45 percent in 2012 and 42 percent on average.

Crop conditions on the Texas High Plains have varied widely because of a May 2 freeze, resulting in later-than-usual planting, crop damage from June hail and wind along with drought. Abandonment has been heavy.

Because of the lateness of the crop and the uncertainty of additional rainfall, an extension agronomist has urged growers to make timely irrigation, insect control and weed management decisions in order to maintain the current fruit set.

Square set under irrigation thus far has been “exceptionally good” because of light early season insect pressure, Mark Kelley, area AgriLife Extension Service cotton agronomist at Lubbock, said in the latest issue of Focus on South Plains Agriculture.

With good growing conditions the remainder of the season and an open fall, good yields of high-quality cotton are “very possible,” he said.

Based on reports from growers, gin managers and others, the Plains Cotton Growers, Inc. has estimated that 60 to 65 percent of the region’s planted acres are “still in the game,” said Mary Jane Buerkle, PCG communications director.

Plantings totaled 3.7 million acres, down 11.5 percent from last year’s 4.179 million and 19.1 percent from 4.572 million in 2011, according to USDA’s National Agricultural Statistics Service.

The PCG estimate indicated standing acres totaled about 2.2 million to 2.4 million, compared with harvested acres of 2.326 million in 2012 and only 1.555 million in 2011 when historic drought drove abandonment to an all-time high of 66 percent.

Meanwhile, trend-following funds sold 3,117 lots in futures-options combined during the week ended July 16 to reduce their net longs 5.2 percent to 57,055 lots, according to traders-commitments data from the Commodity Futures Trading Commission.

Index funds bought a net 271 lots to nudge their net longs up to 70,269 lots, while traders with non-reportable positions sold 703 lots to shave theirs to 6,821 lots.

Commercials bought 3,549 lots, covering 3,148 shorts and adding 401 longs to trim their net shorts to 134,146 lots. In futures only, non-commercials pared their net longs by 1.1 percentage points to 40 percent of the rising open interest.

Source: lubbockonline.com

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