Plains Cotton Cooperative Association (PCCA) Weekly Cotton Market Report: June 3, 2016

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COTTON FUTURES RETREAT, IMPORT MARKETS LACKLUSTER THIS WEEK

The cotton market seemed to be on holiday the entire marketing week ended June 2, not just the Memorial Day holiday on Monday. The July and December contracts at the Intercontinental Exchange (ICE) in New York settled lower all four sessions with July losing a combined 146 points and December dropping 127 points. The current market appears to be very similar to a year ago at this time.

Cotton specific news was mostly absent this week other than the continued sales from China’s reserves. Almost all cotton offered each day continues to find a home, and cumulative sales now total nearly 2.9 million bales. The question on many traders’ and analysts’ minds is how much negative impact the reserve sales will have on China’s imports of raw cotton and cotton yarn.

FRIDAY, MAY 27

Following the largest one day gain in more than six weeks, July cotton settled at 64.28 cents per pound, down 5 points as speculators were evening their positions ahead of the three-day weekend and month end. December settled 9 points lower at 63.85 cents.

TUESDAY, MAY 31

Following Monday’s Memorial Day holiday, futures trading at ICE was choppy due, in part, to the second day of the Rogers Roll period when positions are moved from the nearby month to another. July cotton moved to a high of 64.46 cents soon after the market opened then started descending to a low of 62.90 and remained on negative ground for the remainder of the session. The contract settled at 63.94 cents, down 34 points, and December cotton settled 30 points lower at 63.55 cents.

WEDNESDAY, JUNE 1

A weak Chinese futures market weighed on ICE futures during the session with July cotton immediately moving to negative ground when trading began. The contract moved to a low of 62.94 cents per pound late in the session but managed to recover somewhat and settle at 63.17 cents, down 77 points. The December contract traded between 62.67 and 63.59 cents but settled at 63.00, down 55 points. Spread trading accounted for 57 percent of the session’s action, according to one analyst.

THURSDAY, JUNE 2

Cotton futures failed to find much direction and traded on either side of unchanged throughout the session. The July and December contracts were confined to narrow ranges of 86 and 91 points, respectively. July cotton settled at 62.87 cents, down 30 points, and December settled 33 points lower at 62.67 cents.

The latest export report was about as expected by traders. USDA reported net sales of U.S. upland cotton totaled 124,900 bales in the week ended May 26, down 3 percent from the previous week but up 4 percent from the four-week average. Vietnam, China, Indonesia, and Turkey were the featured buyers. The department also reported net sales of 74,300 bales for delivery in the 2016-17 marketing year. Export shipments in the most recent week totaled 237,300 bales, unchanged from the previous week but up 4 percent from the four-week average. Primary destinations were Vietnam, Turkey, Mexico, and Pakistan.

In other news, strong thunderstorms brought damaging winds, hail and brief, heavy rainfall to portions of West Texas this week. Most of the heaviest rain fell in the immediate Lubbock area, and some fields in the region will have to be replanted. As the week was winding down, no precipitation was in the five-day forecast.

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