Scale mill fixations offered May-July support. Trade expectations for U.S. prospective plantings average 13.292 million acres, up 5.4% from last year and the largest since the heavy abandonment year of 2011.
Cotton futures finished mixed Tuesday, up 24 points to down nine points, as traders looked ahead to the U.S. prospective plantings report.
May closed with the largest gain at 82.02 cents, in the lower third of its 105-point range from down six points at 81.72 to up 99 points at 82.77 cents. With the market closed Friday for Good Friday, May cotton options expire 12 trading sessions ahead.
July settled up 22 points to 82.44 cents, trading within a 102-point range from 82.16 to 83.14 cents. December eased a marginal eight ticks to close at 77.62 cents, in the lower half of a tight 48-point range between 77.50 and 77.92 cents.
Scale-down on-call mill fixations offered support for old-crop deliveries as volatile U.S. stock index futures fell back into negative territory and West Texas Intermediate crude oil dropped sharply.
Volume slowed to an estimated 23,300 lots from 28,532 lots the previous session when spreads accounted for 18,018 lots or 63% and EFP 62 lots. Options volume rose to 6,499 lots (5,362 calls and 1,137 puts) from 5,741 lots (3,320 calls and 2,421 puts).
Trade expectations for U.S. prospective all-cotton plantings average 13.292 million acres, up 5.4% from last year’s 12.612 million. The range is from 13 million to 13.6 million acres.
The USDA will report results of its first survey of producer intentions earlier this month at 11 a.m. CST on Thursday. Its analytical forecast at its Agricultural Outlook Forum last month was for 13.3 million acres, up 2% from the National Cotton Council’s earlier survey of near 13.1 million.
Historically, USDA noted, there’s a strong correlation between the cotton planted area and the ratios of expected cotton prices to corn and soybeans, further adjusted for early June soil moisture conditions on the Texas High Plains.
Cotton futures early this year averaged above price expectations in early 2017, while prices for both corn and soybeans were lower. Also, cotton producers experienced relatively favorable results from the 2017 crop.
Expectations for acreage to exceed the NCC survey, which was reported early in February and encompassed responses from mid-December through mid-January, stems partly from legislation incorporated into the 2014 farm bill for 2018.
The new legislation provides an opportunity to reassign generic base acres to “seed cotton” base and/or other covered commodities based on established planting history.
Previously, a covered commodity — which excluded cotton — had to be planted to the generic base to be eligible for potential program payments. For 2018, cotton now can be planted on the former generic base without forfeiting program eligibility, potentially resulting in additional cotton plantings this spring.
The expected plantings would be the largest since 2011 when producers seeded cotton on 14.735 million acres, but abandoned 5.274 million acres, or 35.8%, when record drought gripped the Texas High Plains. Precipitation at Lubbock that year totaled a mere 5.86 inches.
Futures open interest grew 2,189 lots to 276,474 on Monday, with May’s down 2,394 lots to 113,430, July’s up 4,026 lots to 71,320 and December’s up 387 lots to 72,650. Certified stocks were unchanged at 60,218 bales.
