Old-crop deliveries have advanced after two straight weekly losses and new-crop contracts have posted new seasonal highs in cotton futures in a holiday-shortened trading week.
Most-active July advanced 189 points from the previous Friday’s close to finish Thursday at 92.34 cents, while soon-to-mature May gained 115 points to close at 90.17 cents. December settled up 47 points on its high at 91.94 cents, highest since June.
The market was closed Friday in observance of Good Friday, leaving only three trading sessions until first notice day for May deliveries. May traded at discounts to July as wide as 223 points, a new low for the old-crop spread.
Stocks in deliverable position grew 8,444 bales to 282,084, largest since late July. May’s open interest going into Thursday’s session totaled 18,607 lots, down 8,565 lots.
Cash grower-to-business sales slowed to 1,337 bales from 1,671 bales on The Seam. Prices rose to an average of 79.14 cents from 77.25 cents, reflecting gains to 30.81 cents from 26.74 cents in premiums over loan repayment rates. Daily price averages ranged from 73.35 to 80.12 cents.
Mill fixations underpinned pullbacks. Unpriced on-call positions fell 3,448 lots to 37,449 on the mill side and dipped 294 lots to 2,628 on the producer side in the week ended April 11, government data showed.
The net call difference thus narrowed 3,154 lots to 34,821 (3.482 million bales), which was 28.4 percent of the declining open interest, up from 27.55 percent a week earlier. Unfixed mill positions outweighed those of producers by a bulging ratio of 14.25:1.
News that China’s imports fell 58 percent in March from a year earlier and nearly 10 percent from February elicited a muted market reaction. China’s imports this season have been projected down 41 percent from last season.
As the weekend neared, the market digested data showing U.S. export sales rose to a combined 230,800 running bales for both marketing years during the week ended April 10 from 109,600 bales the prior week. China booked 76,900 bales, a third of the combined sales.
Net all-cotton sales for shipment this season rebounded to 95,000 bales from net cancellations the prior week of 10,200 bales and new-crop sales climbed to 135,800 bales from 119,800 bales.
Commitments for 2013-14 reached 9.637 million running bales, 93 percent of the USDA estimate, compared with 95 percent a year ago. New-crop commitments climbed to 1.482 million bales, widening the margin over forward bookings a year ago to 146,000 bales.
All-cotton shipments of 297,200 bales, down from 311,700 the prior week, hiked the season’s total to 7.499 million, about 72 percent of the forecast, against about 71 percent of final 2012-13 exports a year ago.
Shipments need to average roughly 192,000 bales a week to reach the estimate, while weekly sales averaging around 50,000 bales would match the forecast. Additional cotton from existing stocks will be required to meet export and domestic mill needs prior to volume movement of the new crop.
Growing concerns about drought in the Texas High Plains, the prime cotton area of the top-producing state, have helped to support December.
The Southwest is expected to account for nearly 61 percent of the U.S. upland cotton area this year, the largest percentage in more than 75 years, according to USDA’s Economic Research Service.
If drought conditions continue, the Southwest upland plantings could expand from the area projected in March because tap-rooted cotton is a more drought-tolerant crop than other alternatives.
However, without timely rainfall through the growing season, yields could be low and abandonment heavy. Dry subsoil at planting time makes the crop heavily dependent upon growing season rainfall if sufficient surface moisture is received to get the crop established.
The Southwest is projected to plant nearly 6.7 million acres of upland cotton, up about 650,000 acres, or about 11 percent, from last year and nearly 4 percent above the previous five-year average.
Elsewhere, the problem has been too much rain in the Delta and Southeast, slowing planting progress, especially for corn.
“The longer this rainy weather continues, the more likely that unplanted corn will get switched to cotton and-or soybeans,” commented John Bondurant, Memphis-based trader and Delta producer.
Producers planned to boost cotton acres by 16.6 percent to 1.44 million in the Delta and reduce the cotton area by 2.4 percent to 2.602 million in the Southeast. Upland acres in the drought-stricken West are projected down 16.1 percent to 245,000.
These indications will be updated at the end of June in a report from the National Agricultural Statistics Service on the planted acreage and intended plantings.
U.S. cotton planting crept up two percentage points during the week ended April 13 to 8 percent complete, even with a year ago and a percentage point above the five-year average.
Operations in Texas eked up a point to 11 percent planted, compared with 10 percent a year ago and 12 percent on average. Stands have been established in the Rio Grande Valley.
Plantings progressed to 35 percent done in Arizona and 85 percent in California, up from the state averages of 30 percent and 23 percent, respectively. The only other states with cotton in the ground were Alabama, Mississippi and Oklahoma, all with 1 percent planted.
Meanwhile, trend-following funds sold 2,810 lots in futures-options combined during the week ended April 8 to reduce their net long position by 5.5 percent to 48,387 lots, according to government data. Index funds bought a net 570 lots to nudge their net longs up to 62,679 lots, while small traders sold a net 132 lots to trim theirs to 7,337 lots.
Commercials bought a net 2,363 lots, covering 2,891 lots and liquidating 528 longs to reduce their net shorts to 118,520 lots. In futures only, non-commercials pared their net longs by 1.5 percentage points to 33.3 percent of the open interest.