Howell: Broad commodity buying helps boost cotton to new highs

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A broad-based commodity buying spree, linked to recent U.S. dollar index weakness against a basket of six other major currencies, helped to lift cotton futures to new highs since January last week.

Most-active July closed with a gain for the week ended Thursday of 316 points, or 5.2 percent, to 64.01 cents. An upside breakout Monday featured a close above its 200-day moving average for the first time since December. July posted a midweek high at 64.74 cents, its highest intraday price since Jan. 4.

May, with first notice day for deliveries looming Monday, advanced 285 points to close at 63.49 cents. December closed up 268 points to 62.70 cents, its highest finish since Jan. 22.

U.S. dollar index futures, though up on the day Thursday, finished down 4.2 percent from its March high and 5.4 percent from its January peak. June crude oil slipped on the day but closed up 16.4 percent from its April low and 35.9 percent from its January low. Grains registered multimonth highs during the week.

Cash online grower sales quickened to 22,114 bales from 11,411 bales the prior week on The Seam. Prices climbed to an average of 60.69 cents from 55.49 cents, with premiums over loan repayment rates little changed on an average of 11.60 cents. Daily price averages ranged from 52.77 to 63.12 cents.

U.S. upland export sales for shipment this season were respectable at 104,800 running bales during the week ended April 14, up 24 percent from the prior week but down 10 percent from the four-week average. Sales went to 16 countries, led by China, Pakistan, Vietnam, Brazil, Indonesia, Japan, Turkey and Taiwan.

Net sales for shipment next season of 20,200 RB, up from 18,900 RB the prior week, were reported for Pakistan, Indonesia and Turkey.

Upland shipments of 200,200 RB increased 8 percent from the previous week but fell 13 percent from the four-week average. Shipments went to 25 countries, led by Vietnam, Turkey, Mexico, Indonesia, China, South Korea and Pakistan.

Earlier, confirmation that China will buy additional high-quality cotton eased some concerns over its plans to sell 2 million metric tons, or 9.19 million 480-pound bales, from its huge strategic stockpile.

The sales are scheduled to begin May 3 and continue through Aug. 31, ending prior to movement of the new crop. Sales prices are expected to be based on weekly calculations involving domestic and international values.

Plans to buy for the reserves the equivalent of 30 percent of what is sold were viewed as possibly offering export opportunities for U.S. cotton. The purchases are intended to improve the overall quality of the reserve stocks. Quality of much of the reserves long has been suspect.

The market took in stride news that Turkey has imposed a 3 percent anti-dumping duty on all U.S. cotton imports, effective immediately.

Turkey is the second-largest export market for U.S. cotton with shipments ranging between 1.5 million and 2 million bales. The National Cotton Council steadfastly challenged assertions that U.S. cotton was dumped into Turkey, injuring the domestic fiber market.

The import duty puts U.S. cotton at a competitive disadvantage to cotton produced in other countries, seriously jeopardizing business with Turkish mills, the NCC said in a news release. The council is exploring ways to reverse the decision, such as through World Trade Organization mechanisms and the Turkish judicial system.

Unshipped U.S. upland export sales to Turkey totaled 465,900 RB for this season as of April 14 and 51,900 RB for next season. Shipments for 2015-16 stood at 923,200 RB.

In other international news, the Cotton Association of India has reduced its 2015-16 crop estimate to 34.1 million 170-kilogram bales, or 26.64 million 480-pound bales, from 34.5 million and 26.95 million bales, respectively, a month ago.

The new CAI forecast is 160,000 480-pound bales below USDA’s estimate earlier this month for the world’s largest cotton producer. The largest USDA ending stocks revisions this month were for China and India, down 500,000 and 350,000 bales, respectively, owing to larger demand projections.

Those two countries are forecast to control 73 percent of global stocks. By comparison, Brazil and the United States, the next largest stock holders, together will account for 9 percent of the total.

On the U.S. crop scene, cotton planting crept up two percentage points to 7 percent completed during the week ended April 17, even with a year ago but behind the five-year average of 10 percent, USDA said.

Ten percent of the Texas crop was planted, up from 6 percent last year but down from 12 percent on average. Large hail and significant damage to crops were reported in Central Texas. Subsequently, torrential rains and flooding in early planting areas of South Texas drew attention.

On the program front, an abrupt USDA cut in the transportation cost differential to the Far East mill area used in figuring the adjusted world price resulted in an the AWP rising more than anticipated for the week ended Thursday and the marketing loan gain declining more than expected.

The marketing certificate fell to 2.55 cents from the prior week’s 6.26 cents and is estimated at 1.47 cents for the week of April 22-28.

Upland cotton under loan totaled 2.607 million bales as of April 11 — 225,991 of Form A issued to individual growers and 2.381 million of Form G issued to marketing cooperatives or loan servicing agents.

Meanwhile, trend-following funds aggressively slashed their net shorts by 20,318 lots, or 45 percent, to 16,817 lots during the week ended April 12, according to government supplemental traders-commitments data.

The market gained 261 points for the reporting week, basis May. Index funds boosted their net longs by 1,160 lots to 74,192, while nonreportable traders flipped to net long 609 lots from net short 2,451 lots in a reversal totaling 3,059 lots. Commercials raised their net shorts by 24,537 lots to 57,984, adding 14,139 shorts and liquidating 10,398 longs.

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