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Weekly Cotton Comments                 06/18 05:07

   Cotton Plunges Amid Broad Commodity Selling

   Export sales rebounded and shipments topped the pace needed to reach the 
USDA estimate. High Plains crop tolerated heat. U.S. planting quickened to 90% 
completed; progress in Texas jumped 28 points to 88%. Hedge funds bought 4,057 
lots; index funds sold a net 1,340 lots. Unfixed mill on-call sales in July 
fell 3,513 lots to 10,039.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures tumbled to steep losses amid broad commodity selling as the 
U.S. dollar index strengthened sharply after the Federal Reserve indicated it 
would tighten monetary policy earlier than previously expected.

   Most-active December shed 415 points or 4.7% to close at 84.06 cents for the 
marketing week ended Thursday. This was its lowest close since May 28 and below 
its 40-day moving average. It finished in the lower quarter of its expanded 
513-point range from 88.50 last Friday, highest since Feb. 25, to 53.37 on 
Thursday, lowest since June 1. The price action indicated it needs to get back 
above at least Wednesday's high of 87.14 to regain upside momentum.

   July lost 319 points or 3.6% to close at 84.17 cents, regaining an 11-point 
premium over December. After Friday, there will be eight trading sessions left 
until first notice day. The July-December switch had traded as wide as 155 
points carry on Tuesday before reverting to the inversion on Thursday. March 
dropped 415 points to settle at 83.94 cents.

   The dollar surged after the Fed penciled in two rate hikes by the end of 
2023 and discussed eventual tapering of the central bank's asset buying 
program. This acted as a catalyst driving December corn down the 40-cent limit, 
November soybeans down 90 1/2 cents, gold down $83 per ounce and crude oil down 
$1.26 per barrel. Actions by the Chinese government to restrain surging 
commodity prices that officials warned might disrupt a business revival 
contributed to the selloff.

   Volume increased to an average of 38,908 lots per session from 34,835 lots 
the prior week. Open interest coming into Thursday had declined 14,687 lots to 
213,655, with July's down 35,648 lots to 12,917, December's up 13,248 lots to 
141,407 and March's up 5,440 lots to 31,534. Cert stocks grew 2,488 bales to 

   Cash trading jumped to 9,547 bales from 1,841 bales the previous week on The 
Seam, largely on the strength of a turnover of 9,212 bales last Friday when 
prices averaged 88.51 cents per pound.  For the week, prices averaged 87.74 
cents, up from 78.48 cents, with premiums over loan rates up to an average of 
37.46 cents from 29.73 cents. Grower-to-business sales totaled 9,196 bales, all 
of which changed hands last Friday, and business-to-business sales were 351 
bales. Offerings late Wednesday were 9,177 bales.

   On the competitive scene, the average of the five lowest-priced world 
growths for the Far East gained 180 points to 93.41 cents, while the 
lowest-priced U.S. growth landed there gained 140 points to 96.15 cents. The 
U.S. premium thus narrowed 40 points to 2.74 cents. The adjusted world price 
rose to 74.16 cents.

   On the demand front, net all-cotton export sales for this season and next 
rose to 216,500 running bales from 133,500 RB the prior week but were down from 
254,200 RB in comparable sales a year ago, USDA reported. Sales for 2020--21 
edged up to 113,600 RB from 112,100 RB the week before and 107,800 RB last 
year, while new-crop sales of 102,900 RB were up from 21,400 RB but down from 
146,400 RB, respectively.

   Upland net sales for 2020-21 of 111,300 RB, up 3% from the prior week but 
down 22% from the four-week average, went to 14 countries, led by Pakistan, 
Turkey, Indonesia, Mexico and Vietnam. Cancellations were 6,800 RB. Pima sales 
fell to a marketing year low of 2,300 RB, down 3,900 RB the previous week and 
4,900 RB last year, and went primarily to China, Bangladesh, Thailand, Germany 
and Vietnam.

   All-cotton 2020-21 commitments of 16.758 million RB -- outstanding sales of 
2.294 million RB plus shipments -- still stood about 4% below a year ago and 
were some 850,000 RB or about 5% over the USDA export estimate.  Cumulative 
sales a year ago were 15% above final shipments.

   Commitments for 2021-22 totaled 2.148 million RB, widening the gap behind 
forward bookings a year ago to 1.062 million RB or 33%. These new-crop 
commitments amounted to 15% of the USDA forecast; year-ago forward bookings 
were 21% of the current 2020-21 export projection.

   All-cotton shipments increased to 315,800 RB from 275,100 RB the previous 
week but were down from 354,300 RB last year. Upland shipments of 303,800 RB, 
up 18% from the previous week but down 6% from the four-week average, went to 
22 countries, led by Vietnam, Turkey, China, Pakistan and Mexico.

   Shipments of upland and Pima combined for the season still were about 12% 
ahead of a year ago at 13.834 million RB. That represented 87% of the USDA 
export estimate, compared with 82% of final shipments a year ago. With 
seven-plus weeks remaining in the marketing year, shipments now need to average 
roughly 284,100 RB per week to make the USDA estimate.

   On the crop scene, cotton in areas on the Texas High Plains which got good 
rains recently appears to have tolerated the onset of heat well thus far. 
Temperatures soared to a record 108 degrees last Friday at Lubbock, breaking 
the old mark of 105 set in 1934 and tied in 2008. The high was 16 degrees above 
normal. Daytime highs subsequently moderated to the middle to upper 90s but are 
expected to hit 103 Sunday before dipping to 87 Tuesday when there'll be a 
slight chance of showers and thunderstorms.  Some good stands have been 
achieved in areas south of Lubbock.

   U.S. cotton planting advanced at a 19 percentage-point pace, fastest of the 
season, to reach 87% completed during the week ended Sunday, up three points 
from last year and a point above the five-year average, according to USDA's 
progress report. Conditions showed good to excellent down a point from a week 
earlier to 45%, but up from 43% last year, and poor to very poor down six 
points to 9%, down from 17% a year ago.

   Planting in Texas jumped 28 points to 88% done, also three points above last 
year and a point above the five-year average. Cotton rated good to excellent 
dipped a point to 28% and poor to very poor also dropped a point to 11%, down 
from 30% and 25%, respectively, last year. Squaring at 14% was four points 
below a year ago and a point below average.

   Planting had begun in the Rolling Plains where the deadline for full 
insurance coverage is Sunday. Blooming and boll formation increased in the Rio 
Grande Valley. Favorable weather aided crop progress in the Edwards Plateau and 
Coastal Bend. However, some cotton showed nitrogen deficiencies from excessive 
rains in the Upper Coast and Coastal Bend and needed a period of warm, sunny 
conditions. Producers were eager for soils to firm in the Blacklands so 
planters, cultivators and sprayers could enter fields. Stands in low-lying 
areas struggled or were lost.

   Planting was completed in Arizona, Arkansas and California and was within 
one to three points of completion in Missouri, Alabama, North Carolina and 
Tennessee. Producers in Georgia, the second largest cotton state, had planted 
94% of their expected acreage, a point above average. The widest margin over 
the average was in Kansas at 96% done, up 13 points, while Oklahoma, which has 
the third largest prospective acreage, lagged the most at 60% planted, 13 
points below its average.

   Squaring across the belt at 13% was three points behind last year and the 
average.  Cotton rated good to excellent in Georgia at 64% was down two points 
from a year ago, but in Alabama at 91% it was up 11 points from the prior week 
and up 10 points from last year. Good-to-excellent ratings fell 14 points from 
the previous week to 61% Mississippi and dropped 17 points to 56% in Tennessee.

   On the money-flow front, hedge funds bought 4,057 lots to boost their net 
longs to 48,299 in cotton futures-options combined during the week ended June 
8, according to the latest traders-commitments data reported by the Commodity 
Futures Trading Commission.

   They added 3,461 longs and covered 596 shorts. Index funds sold a net 1,340 
lots to reduce their net longs to 77,571, while speculators bought 2,262 lots 
to raise their net longs to 10,633. Overall, the speculative outright longs 
outweighed the outright shorts by an unwieldly 5.66:1. The subsequent price 
plunge Monday likely reduced the ratio. Non-commercial spreading declined 5,569 
lots to 61,580.

   Commercials sold 4,978 lots, adding 4,138 shorts and liquidating 840 longs 
to increase their net longs to 10,633. Their share of the open interest rose by 
2.1 percentage points to 47.1%.

   Prices during the reporting week traded from 82.30 to 86.50 cents in July 
and from 83.32 to 86.85 cents in December. Combined open interest fell 2,448 
lots to a delta-adjusted 290,060 amid active rolling, spread trading and 
liquidation linked to the approaching maturity of July, where options expired 
Friday and first notice day looms June 24.

   Unpriced mill on-call sales in July fell 3,513 lots to 10,039 during the 
week ended last Friday, CFTC reported after the close Thursday, while the 
unfixed producer position dropped 251 lots to 3,628. This left a net call 
difference of 6,411 lots, 24.5% of the futures OI, up from 15%. July's OI fell 
38,369 lots to 26,160, of which the unpriced mill share rose to 38.4% from 21%.

   In December, the unpriced mill sales rose by 3,812 lots to 47,851 and the 
unfixed producer position dropped 1,496 lots to 24,108. The ratio of unpriced 
mill sales to unfixed producer holdings was 1.98:1. Overall, mills boosted 
their unpriced sales 3,846 lots to 117,280 and producers cut their unfixed 
position 1,015 lots to 47,947.

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