COTTON FUTURES RALLY, USDA RELEASES SUPPLY AND DEMAND ESTIMATES
In contrast to the previous week, cotton futures at the Intercontinental Exchange (ICE) rallied sharply in the marketing week ended June 9, mostly on speculative buying. In fact, futures posted back-to-back triple-digit gains for the first time since last August. The July contract gained 209 points during the week, and December gained 263 points. Other factors offering support included a large number of unfixed on-call sales and the high open interest in July call options.
Some traders and analysts were expecting USDA to raise its estimate of 2015-16 U.S. cotton exports in this month’s supply and demand reports. However, the department left the estimate unchanged at 9.0 million bales. The reports contained only minor changes for U.S. figures in the 2016-17 season. U.S. beginning stocks were raised 100,000 bales compared to last month, production was unchanged at 14.8 million bales, and domestic use and exports were unchanged. World production for the coming season was reduced 1.2 million bales to 103.17 million, world consumption was reduced 190,000 bales to 110.59 million, and world ending stocks were reduced 1.75 million bales to 94.73 million.
FRIDAY, JUNE 3
Active buying lifted the July contract off negative ground, eventually reaching a high of 64.11 cents per pound on continued good export sales figures and a sharp decline in the U.S. dollar index. The contract settled at 63.92 cents, up 105 points. December cotton briefly moved lower after the session began but found strength and reached a high of 63.95 cents. The contract finished near the top of its 114-point range, settling at 63.91 cents, up 124 points.
MONDAY, JUNE 6
The market’s strength continued following the weekend with all ICE contracts posting triple-digit gains. July and December cotton immediately moved higher when the session began but initially traded in narrow ranges until buyers returned. Both contracts settled at their highest levels since mid-December; July at 65.55 cents per pound, up 163 points, and December at 65.54 cents, also up 163 points. Also on Monday, USDA reported 75 percent of the anticipated U.S. acreage had been planted. Texas plantings were pegged at 65 percent.
TUESDAY, JUNE 7
A lack of clear direction kept futures contracts on either side of unchanged throughout the session. All contracts posted modest to moderate gains by the close of trading. July cotton settled 30 points higher at 65.85 cents, and December also settled 30 points higher at 65.84 cents. Tuesday also marked the beginning of the Goldman roll where long July positions are shifted to December, and ICE volume was almost 63,000 contracts.
WEDNESDAY, JUNE 8
The rally stalled somewhat, and futures settled mixed, although speculative buying remained active. Spread trading accounted for approximately 59 percent of the session’s volume. July cotton settled at 65.78 cents, down 7 points. However, the December contract continued its winning streak settling 12 points higher at 65.96 cents.
THURSDAY, JUNE 9
Cotton futures closed lower across the board as most commodities and major equity markets around the world were weaker. ICE contracts traded on negative ground for the majority of the session. July cotton settled in the middle of its 121-point range at 64.96 cents, down 82 points. The December contract fell to a low 64.80 before buyers returned and lifted it to the middle of a 104-point range. December, now the most actively traded month, settled at 65.30 cents, down 66 points.
Also on Thursday, USDA reported net export sales of U.S. upland cotton totaled 110,100 bales in the week ended June 2. Featured buyers were Vietnam, China and Indonesia. Sales for delivery in the 2016-17 marketing year totaled 112,700 bales. Export shipments for the most recent week totaled 203,600 bales, and Vietnam, Turkey, South Korea, and China were the primary destinations.