Tightening supply of high grades prior to new-crop movement and a large on-call imbalance helped to power the advance. U.S. cotton industry applauds ginning cost-share program.
Cotton futures soared to a batch of new contract highs Monday, with benchmark May leading the way on a closing jump of 314 points or 3.83%.
May finished at 85.23 cents, just off the high of its 306-point range from up 15 points at 82.24 cents to up 321 points at 85.30 cents. It gapped higher on the overnight opening and triggered buy stops during the day after moving through the prior two weekly highs.
July closed up 263 points to 84.98 cents, trading within a 257-point range from 82.48 to 85.05 cents, and December settled up 90 points to 77.95 cents, the high of its 99-point range. Maturing March settled up 269 points to 85.41 cents, trading between 82.60 and 83.81 cents.
A tightening supply of high grades prior to the availability of new-crop cotton, a healthy export market offtake of discounted low grades and a large imbalance in unpriced on-call positions helped to power the advance. Cotton also may have drawn support from big gains in oil prices and a quick reversal from early stock market losses to strong gains.
Volume quickened to an estimated 44,400 lots from 24,114 lots the prior session when spreads accounted for 10,811 lots or 45%, EFP 344 lots and EFS nine lots. Options volume increased to 9,809 lots (5,389 calls and 4,420 puts) from 8,158 lots (5,251 calls and 1,907 puts).
On the policy front, U.S. cotton industry leaders applauded Secretary of Agriculture Sonny Perdue’s announcement over the weekend of a ginning cost-share program.
The program, which will offset a portion of producers’ 2016-crop ginning costs, resulted from utilization of USDA’s authority under its Commodity Credit Corp. charter to help facilitate marketing of commodities, the National Cotton Council said.
Ron Craft, chairman of the NCC and a ginner and producer from Plains on the Texas High Plains, said in a statement the cotton industry “strongly commends Secretary Perdue for his efforts to deliver much-needed marketing assistance for our nation’s cotton producers.”
The program, he said, will help to fill a safety net void until the seed cotton program is implemented with the 2018-crop year. This will make cotton eligible for the Price Loss Coverage and Agricultural Risk Coverage programs available on other major crops.
Shawn Holiday, Lamesa, Tex., producer and chairman of the American Cotton Producers, said growers across the belt are grateful for the commitment to provide marketing assistance to a commodity that is struggling because of heavily subsidized foreign fiber competition and the immediate lack of a safety net policy on part with other crops.
“The industry will continue to work with USDA and Congress to implement the long-term policy solutions recently enacted by Congress that will provide stability for the cotton industry going forward,” he added.
The Lubbock-based Plains Cotton Growers, Inc. commended Perdue and USDA and expressed appreciation for the House Agriculture Committee led by Chairman Mike Conaway “understanding the needs of cotton producers and acknowledging the success of the previous cotton ginning cost-share program” in 2015.
Johnie Reed, PCG president from Kress, said the program “will improve many growers’ financial situations and help keep them in business.”
Per-acre payment rates, based on a producer’s 2016 cotton acres reported to the Farm Service agency, will be set at 20% of USDA’s figures on regional costs of ginning and (misworded in morning comments) will be $23.21 in the Southeast, $30.39 in the Mid-South and $48.02 in the West.
Payments are capped at $40,000 per producer or entity and don’t count against the 2014 farm bill payment limitations. Applicants must have been actively engaged in farming in 2016, meet conservation compliance provisions and a $900,000 adjusted gross income limit. Signup is March 12-May 11.
Futures open interest gained 667 lots to 266,120 on Friday, with March’s down seven lots to 73 and May’s up 233 lots to 130,811. Certified stocks declined 1,856 bales to 192,423 on the addition of 3,662 bales and decertification of 5,518 bales.