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Weekly Cotton Comments                 05/20 05:13

   July Cotton Rebounds From 15-Session Low

   "Gusher" of July mill fixations suspected. Export sales for 2021-22 and 
2022-23 edged up to 141,300 RB; shipments again lagged. Cotton 37% planted, 
still on par with average. Some planters rolled around-the-clock in the Texas 
Plains; blooms seen in Valley cotton. Hedge funds sold 4,317 lots as July fell 
to the May low. Unpriced mill on-call sales in July fell 5,229 lots. Spot China 
cotton prices plunged below world values.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures finished ahead for the marketing week ended Thursday, with 
most-active July rebounding 217 points or 1.49% to close at 147.70 cents and 
December adding 55 points or 0.43% to settle at 122.88 cents.

   July finished in the upper half of the week's 10.18-cent trading range from 
151.95 cents on Tuesday, 600 points below the May 4 contract high, to 141.12 on 
Thursday, its lowest intraday print since April 28. It posted the highest 
settlement on Monday (150.65 cents) since the contract high close on May 4.

   December, which took over the open interest lead on Tuesday in what is 
believed to have been the earliest this has ever happened, added 55 points or 
0.43% for the week to settle at 128.22 cents. It posted back-to-back contract 
highs Monday and Tuesday at 133.20 and 133.79 cents and a contract high close 
Monday at 132.96 cents. December closed in the lower half of its 7.39-cent 
range.

   The inverted July-December intercrop straddle widened 162 points to settle 
at 19.48 cents, while the new-crop December-March inversion narrowed 103 points 
to close at 4.29 cents. With December's OI gaining on July's, talk circulated 
last week that some index traders and funds may have rolled some longs early 
(selling July, buying December).

   Technically, although July skidded below short-term support at 142.10, it 
quickly shot back into the black and closed above that to negate the break amid 
a "gusher" of suspected mill fixations, a veteran trader said. But December and 
March still closed in the red for the day.

   Volume averaged an estimated 29,400 lots per session, up from 25,800 lots 
last week. Open interest edged up 163 lots for the week to 202,925, with July 
down 6,527 lots to 80,066, December up 4,011 lots to 84,211, March up 237 lots 
to 16,619 and May up 647 lots to 5,722. Cert stocks dipped 13 bales to 1,088.

   Online cash sales increased to 2,264 bales from only 588 bales on The Seam. 
Prices gained 526 points to average 130.15 cents per pound, reflecting a 
298-point gain to an average of 79.35 cents in premiums over loan values. 
Grower-to-business sales were 270 bales and business-to-business turnover was 
1,994 bales. Offerings late Wednesday were 30,200 bales, indicative of scant 
available supplies left for sale.

   On the competitive scene, the average of the five lowest-priced world 
growths for the Far East gained 242 points to 164.42 cents, while the 
lowest-priced U.S. growth landed there added 250 points to 164.65 cents. The 
U.S. premium thus widened eight ticks to 23 points. The adjusted world price 
rose to 143.24 cents.

   World values as measured by the Cotlook A Index coming into Thursday stood 
at 167 cents, up 530 points from a week earlier, narrowing the international 
basis by 22 points over the prior-day July futures close. This represented an 
18.45-cent premium over the Forward A Index, introduced last week and quoted 
coming into Thursday at 148.55 cents.

   On the demand front, all-cotton export sales for this season and next came 
in at 141,300 running bales during the week ended May 12, up from 123,100 RB 
the previous week and 138,000 RB a year ago. Current-crop sales were 113,200 
RB, up from a seasonal low of 29,600 RB the prior week but down from 116,100 RB 
last year; new-crop sales fell to 28,100 RB from 93,500 RB the week before but 
were up from 21,900 RB a year ago.

   Upland sales for 2021-22 of 110,900 RB, up from the marketing year low of 
27,500 RB the week before and up 3% from the four-week average, went to a dozen 
countries, led by India (34,100 RB), Vietnam and Turkey. Cancellations were 
18,300 RB. India (13,200 RB) also was the largest destination for upland 
2022-23 sales of 25,400 RB.

   All-cotton 2021-22 commitments -- outstanding sales of 5.662 million RB plus 
shipments -- reached 15.334 million RB, down some 826,000 RB or 5% from a year 
ago and 107% of USDA's export forecast. A year ago, cumulative sales were 102% 
of final shipments. New-crop commitments reached 3.106 million RB, up 1.273 
million RB or 69% from forward bookings last year and 13% of the USDA 2022-23 
forecast.

   Outstanding current-crop sales plus new-crop commitments totaled 8.767 
million RB, up 3.297 million RB from a year ago.

   Combined shipments of upland and Pima or extra-long staple cotton slipped to 
353,500 RB from 372,800 RB the previous week but were up from 353,000 RB last 
year. Upland shipments of 343,200 RB, down 6% from the prior week and 11% from 
the four-week average, went to 22 countries, headed by China (101,600 RB), 
Vietnam and Turkey.

   To achieve the forecast, all-cotton exports need to average roughly 421,400 
RB per week over the 11 weeks remaining in the marketing year.       

   On the U.S. crop scene, cotton planting advanced 13 percentage points to 37% 
completed during the week ended Sunday, USDA reported, a point behind last year 
and even with the five-year average.

   Planting progressed eight points in Texas to 30% done, down four points from 
last year and three points from the five-year average, and moved up 17 points 
in Georgia to 39% completed, up four and three points, respectively. Ten states 
were ahead of their five-year averages.

   Some areas of the Texas High Plains got up to 2 inches of rain and trace to 
light amounts fell in the adjoining Rolling Plains east of the Caprock. 
Coverage wasn't widespread, however, and drought conditions prevailed 
throughout the region. Winds gusting more than 80 miles per hour damaged some 
structures.

   Lots of acres were planted late in the week following the thunderstorms. 
Some producers planted around the clock in efforts to take advantage of 
available moisture before it was lost. Others had begun dry-planting, hoping 
for timely rain to achieve stands.

   Some longtime Plains producers have recalled previous drought years when 
dry-planted fields remained barren until September when rains finally brought 
cotton to "stands just as pretty as you please."

   Elsewhere, hot, dry, windy conditions prevailed in the Rio Grande Valley in 
the southern tip of Texas, traditional source of the nation's first new-crop 
cotton. Even irrigated crops were showing stress. Many growers were irrigating 
and cultivating.

   Daniella Sekula, Texas AgriLife IPM agent, reported seeing the first 
blooming cotton and small dime-size bolls. Cotton aphid pressure has calmed 
down, the agent said. Many growers have sprayed and an abundance of predators 
are feeding on aphids.

   "We did pick up on a few more adult fleahoppers in some mid-Valley cotton 
but didn't see any blasted squares anywhere yet or even any population of fleas 
close to threshold" requiring treatment, Sekula said, but advised producers to 
be on the lookout.

   On the money-flow front, trend-following hedge funds sold 4,317 lots to cut 
their net longs to 54,901 in cotton futures-options combined during the week 
ended May 10 as the July contract fell to the low for May, according to the 
latest traders-commitments data reported by the Commodity Futures Trading 
Commission.

   They liquidated 3,614 longs and added 703 shorts, while index funds sold 
2,392 lots to lower their net longs to 68,147 and non-reportable traders -- 
mostly small speculators -- sold a net 1,455 lots to drop theirs to 10,793. The 
funds-specs selling was considered mostly profit-taking.

   Commercials were on the other side, buying 8,162 lots to chop their net 
shorts to 133,842, smallest since June 1. They covered 6,298 shorts and added 
1,867 longs, reducing their net shorts by 1.8 percentage points to 48% of the 
combined open interest.

   July's trading range spanned 13.85 cents for the reporting week -- from the 
contract high of 155.95 cents on May 4 to 142.10 on May 10. Combined open 
interest fell to a delta-adjusted 278,315, smallest since July 13.

   Meanwhile, unpriced July mill on-call sales declined 5,229 lots to 50,498 
last week, CFTC data showed after the close Thursday, while unfixed producer 
purchases dropped 706 lots to 4,681. The net call difference narrowed 4,523 
lots to 45,817, 53.9% of the July OI. The unpriced mill sales outweighed the 
unfixed producer position by a ratio of 10.97:1, up from 10.34:1.

   On the international scene, contrary to cotton price movements across the 
world, spot prices in China have plunged, the Foreign Agricultural Service 
noted in its May world markets and trade report last week.

   The Cotlook A Index has exceeded China's spot prices for the first time in 
11 years, FAS said. From April 6-May 9, the A Index gained 8.5 cents from 154 
to 162.5 cents, while China's spot prices fell 12.3 cents from 162.9 to 150.6. 
U.S. prices gained 5.8 cents, from 132.1 to 137.9.

   High lint prices and large cotton yarn/fabric stocks have continued to 
suppress lint demand in China. A depreciating yuan against the U.S. dollar, 
large commercial stocks and slowing demand for yarn have pressured prices. Just 
two months ago, the A Index was roughly 30 cents lower than domestic prices in 
China, signaling the dramatic change between international and China prices.   




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