Plains Cotton Cooperative Association (PCCA) Weekly Cotton Market Report: June 17, 2016



Cotton futures at the Intercontinental Exchange (ICE) moved slightly lower this week in contrast to the previous week when the July and December contracts gained 209 and 263 points, respectively. For the marketing week ended June 16, July cotton lost 167 points as its first notice day on June 24 approached, and the December contract lost 37 points. The losses were muted by a sharp rally at ICE on Thursday fueled by renewed speculative buying.


ICE futures struggled to find direction as the marketing week began and traded on either side of unchanged as spreads and position rolls accounted for much of the large turnover during the fourth day of the primary index fund roll period. July cotton traded in a 103-point range and settled at 64.75 cents per pound, down 21 points. The December contract traded in a 107-point range before settling at 65.07 cents, down 23 points. Volume at ICE was estimated at more than 43,000 contracts.


Futures slowly moved higher in early trading before speculative selling emerged and created a large outside range day. The range for July was 254 points, and December’s was 226 points as the contract traded to a low of 64.04 cents. July cotton settled 96 points lower at 63.79 cents, and December settled at 64.08 cents, down 99 points, its lowest level since June 3.


Speculative selling continued, and futures spent the entire session on the defensive. Traders also noted negative macroeconomic news, a favorable crop progress report, and continued progress of the Indian monsoon. December cotton traded lower and in a narrow range until selling pressure increased. The contract briefly traded on positive ground but settled 17 points lower at 63.91 cents. July cotton settled 75 points lower at 63.04 cents.


July cotton settled lower for the sixth consecutive session, and December was lower for the fifth consecutive session at the close of trading at ICE. December actually moved higher in early trading, reaching a high of 64.22 cents per pound before selling pressure returned. The contract settled at 63.62 cents, down 29 points, and July cotton settled 45 points lower at 62.59 cents.


Traders were surprised by the sharp rally Thursday that followed a disappointing export sales report. It appeared speculative buying returned to the market. Futures moved lower when the session began, then they traded on either side of unchanged for a while after USDA released its export report. Contracts then moved higher when renewed buying ensued, and December cotton settled 131 points higher at 64.93 cents. July settled 70 points higher at 63.30 cents.

The latest export sales and shipment report from USDA showed net sales of U.S. upland cotton totaled 64,100 bales in the week ended June 9, down 42 percent from the previous week and 54 percent from the four-week average. Featured buyers were Vietnam, Pakistan and Indonesia. Export sales for delivery in the 2016-17 season totaled 37,800 bales, and the featured buyers were Mexico, Turkey, Indonesia, and Vietnam. Export shipments for the week totaled 140,800 bales, down 31 percent from the previous week and 38 percent from the four-week average. Primary destinations were Vietnam, Turkey and Mexico.

The latest crop progress and condition report showed 89 percent of projected U.S. cotton acreage had been planted as of June 12. Texas plantings stood at 86 percent compared to the five-year average of 91 percent. In Oklahoma, 78 percent of the crop had been planted, slightly ahead of the five-year average, and 56 percent of the Kansas crop had been planted compared to the five-year average of 80 percent.