Howell: Cotton slides from six-week high, rallies on export sales

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By Duane Howell

For A-J Media

Higher-than-expected export sales and crop-year high shipments offered support last week as cotton futures snapped a three-session losing streak in current-crop deliveries after spot May rose to a six-week high.

May gained 59 points for the week ended Thursday to close at 59.03 cents, in the upper half of its 113-point range from 58.15 to 59.48 cents, its highest price since Feb. 22. It held closes above its falling 50-day moving average (now 58.67) after settling back above it on April 1.

July rose 26 points to finish at 58.57 cents and new-crop December added 44 points to settle at 58.21 cents.

Cash on-line grower sales increased to 10,654 bales from 7,085 bales on The Seam. Prices climbed to an average of 53.76 cents, up from 48.40 cents the prior week and the highest since the marketing week ended Feb. 25, with daily averages ranging from 45.51 to 57.58 cents. Premiums over loan repayment rates averaged 9.78 cents, up from 5.67 cents.

Net U.S. all-cotton export sales for shipment this season of 224,100 running bales during the week ended March 31, up from 98,600 RB the prior week, brought 2015-16 commitments to 7.818 million RB.

Commitments narrowed the gap behind year-ago sales by 160,000 RB to 2.413 million RB, or to 24 percent. Combined outstanding sales plus shipments were 85 percent of the USDA export forecast, compared with 94 percent of final exports a year ago.

All-cotton shipments jumped to 344,100 RB from 205,800 RB the prior week, boosting the season’s total to 5.084 million RB. The lag behind year-ago exports still widened a bit to 1.352 million RB, or to 21 percent.

Shipments of upland and Pima combined reached 55 percent of the USDA all-cotton estimate, compared with 59 percent of final exports at the corresponding point last season.

Exports need to average roughly 243,000 RB a week to achieve the estimate, while sales averaging about 82,200 RB would match the forecast.

Net sales for shipment next season slipped to 28,700 RB from 35,200 RB the week before. This brought 2016-17 commitments to 1.111 million RB and widened the lead over forward bookings a year ago to 190,000 RB.

Traders continued to await additional details of China’s plans for a resumption of sales from its massive stocks. Reports have indicated the auctions will involve around 21.1 million bales from three crop years, including 1.37 million bales of imported cotton.

A mid-April startup is widely expected but unconfirmed, as is the mechanism by which prices will be established, Cotton Outlook said in a monthly review. A combination of domestic and international values may be used in setting the price on a weekly basis.

“Until the details become clear, however, the potential impact on international cotton and cotton yarn prices remains difficult to construe,” Cotton Outlook said.

Elsewhere on the international scene, cotton production in India, the world’s largest producer, is estimated at 27.3 million bales this season by the U.S. agricultural attaché in Mumbai, up 500,000 bales from the official USDA forecast.

The post forecast 2016-17 production at 28.5 million bales on marginally lower plantings of 11.8 million hectares (29.2 million acres). Higher yields are expected through better crop, pest and weed management practices and a “normal” monsoon season after two years of deficit rainfall.

The USDA will release its updated 2015-16 supply-demand estimates on Tuesday and its first official 2016-17 world forecasts in May.

On the U.S. crop scene, cotton growers had planted 3 percent of their expected acreage as of April 3, compared with 2 percent last year and the five-year average of 5 percent, USDA reported.

The report was about as expected, with Texas plantings at 5 percent, up from 1 percent last year but down from the average of 8 percent. Arizona growers planted 25 percent, even with a year ago and two points behind average. No cotton plantings were reported in other states.

Traders eyed an International Cotton Advisory Committee report that world cotton planting is expected to expand 1 percent to 31.3 million hectares (77.3 million acres) in 2016-17 as heavier production falls shy of stable consumption.

With cotton planting commencing in the Northern Hemisphere, the ICAC estimates, converted to 480-pound bales from metric tons, projected world production up 4 percent to 105.4 million.

Consumption is forecast up 0.4 percent to 109.7 million bales, resulting in a production shortfall of 4.3 million bales. This follows a 2015-16 production deficit estimated by ICAC at 8.1 million bales.

World cotton trade is expected to recover by 1 percent to 34.4 million bales after declining a projected 3 percent this season. Vietnam and Bangladesh are likely to be the largest 2016-17 cotton importers on volumes forecast up 25 percent to 6.4 million bales and 5 percent to 5.1 million bales, respectively.

Global ending stocks, projected down 8 percent to 93.4 million bales this season, are expected by ICAC to fall by 5 percent in 2016-17 to 89.1 million bales. This would mean the world stocks-to-use ratio would fall to 81.2 percent from 85.4 percent in 2015-16.

The ICAC projected world prices as measured by the Cotlook A Index at averages of 70 cents in 2015-16 and 72 cents in 2016-17. That would be the first increase in world prices in three years.

Meanwhile, trend-following funds boosted their net shorts 2,902 lots to a record 41,110 in cotton futures-options combined during the week ended March 29, data from the Commodity Futures Trading Commission showed.

May futures lost 99 points that reporting week, rallied three sessions in a row after release of the data, retreated the next three days, and rebounded on Thursday. Index funds nudged their net longs up a marginal eight lots to 69,855, while nonreportable traders upped their net shorts by 505 lots to 3,795.

Commercials bought 3,400 lots, adding 1,960 longs and covering 1,440 shorts to reduce their net shorts to 24,950 lots.

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