Howell: Cotton surges amid unpriced mill sales, export support

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Large unpriced old-crop on-call mill sales, with first notice day for July deliveries looming 18 trading sessions after Memorial Day, and support from underlying export demand helped to power cotton futures to strong gains last week.

Spot July advanced 266 points for the week ended Thursday to close at 64.33 cents, its highest finish since May 2 and near the week’s high of 64.55 cents, shy of the April swing high of 64.75 cents.

December gained 261 points to settle at 63.94 cents, its highest close since Jan. 5, just a tick off the week’s high and above the May swing high of 63.69.

Cash online grower sales increased to 7,248 bales from 2,809 bales on The Seam. Prices rose to an average of 56.27 cents from 54.29 cents, while premiums over loan repayment rates dipped to 7.02 cents from 7.63 cents. Daily price averages ranged from 51.55 to 57.13 cents.

Unpriced on-call mill positions based in July totaled 20,715 lots, or about 2.07 million bales, as of May 20, the latest government data showed, and outweighed unfixed producer holdings by a ratio of 5.99:1.

July options expire June 10 and first notice day is June 24. Growing cert stocks reached 94,202 bales Thursday, up from 57,746 bales on May 2.

U.S. all-cotton export sales for shipment this season and next climbed to 266,800 running bales during the week ended May 19 from 255,300 RB the previous week. Those were the largest upland-Pima sales for both crop years since March 10.

Old-crop sales of 145,200 RB brought 2015-16 commitments to 8.336 million RB, 99 percent of the USDA export estimate. Commitments trailed year-ago sales by 2.201 million RB, or by 20 percent, the same percentage by which USDA estimates exports will be down from 2014-15.

Shipments of 254,700 RB boosted the total for the season to 6.72 million RB, down 1.94 million, or 22 percent, from a year ago. Exports were 77 percent of the estimate, compared with 79 percent of final 2014-15 shipments at the corresponding point last season.

To achieve the estimate, shipments need to average roughly 201,200 RB a week for the remaining 10 weeks of the season. Shipments have topped that in five of the last six weeks.

New-crop sales jumped to a high for the year of 121,600 RB, bringing 2016-17 commitments to 1.362 million RB, up from forward bookings a year ago of 1.272 million RB.

On the U.S. crop scene, planting slowed to a six-percentage-point pace to reach 46 percent completed during the week ended May 22, up two points from last year but eight points behind the five-year average, data from USDA’s National Agricultural Statistics Service showed.

Planting crept up only a point to 31 percent seeded in Texas, compared with 26 percent last year and the five-year average of 41 percent. The pace quickened to 18 points and 58 percent completed in Georgia, a point behind last year and the average.

Progress was most advanced at 99 percent in Arizona, 94 percent in Arkansas, 93 percent in California and 95 percent in Missouri. Except for a two-point lag in California, those states were ahead of their averages by margins ranging from four points in Arizona to 17 points in Missouri.

Planting moved at the fastest pace in Louisiana and North Carolina at 25 and 19 points, respectively, reaching 79 percent and 58 percent completed, but that was still nine and 17 points behind their averages.

Wet, cool conditions kept many planters parked on the Texas High Plains during the reporting week, but then progress finally gained momentum across much of the region under favorable conditions.

In international news, China’s cotton imports fell 57 percent to 64,764 metric tons (320,420, 480-pound bales) in April from a year earlier, customs figures showed, and dropped 54 percent to 279,458 tons (1.28 million bales) during the first four months of calendar 2015 from the January-April period last year.

The USDA has projected China’s imports for the 2015-16 marketing year ending July 31 at 4.25 million bales, down 750,000 bales from its April estimate and down 49 percent from last season’s 8.28 million bales. Imports in 2016-17 are forecast to rise only to 4.5 million bales.

China purchased 99,700 statistical bales of U.S. cotton in April, its largest import supplier for the month. Those imports preceded the onset of China’s stockpile sales on May 3.

But China also ranked third and second among the largest old-crop buyers from 17 and 15 countries in the last two U.S. export sales reporting weeks, booking 28,900 RB of upland during the week ended May 12 and 24,200 RB the following week.

China’s imports are expected to have a heavy concentration of higher qualities for blending with lower qualities from the stockpile.

Talk circulated that daily stockpile offerings declined by Thursday to the smallest thus far and that mill buyers, all of whom have low inventories, have complained of slow deliveries. Cumulative stockpile sales were reported to have exceeded 500,000 metric tons, or about 2.3 million statistical bales.

Meanwhile, trend-following funds added a bare eight lots to their net long position in cotton futures-options combined during the week ended May 17, a period of tranquil price action until the last day when the market surged to triple-digit closing gains.

Those funds covered 887 shorts and liquidated 879 longs, according to the latest supplemental government traders-commitments data. Index funds reduced their net longs by 1,800 lots to 66,749, while nonreportable traders upped theirs by 767 lots to 4,887.

Commercials reduced their net short position by 1,025 lots to 95,950, adding 5,111 longs along with 4,086 shorts.

In futures only, noncommercials shaved their net longs by 0.1 percentage point to 15.1 percent of the open interest, which rose by 4,420 lots to 190,763.

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