After threatening a downside breakout, cotton futures have remained within a tight consolidation pattern in light activity prior to the seasonΆs first survey-based U.S. crop estimate and updated global supply-demand forecasts.
Benchmark December eased off 42 points to close the week ended Thursday at 70.97 cents, slightly above its 50-day moving average. March settled down a fractional 18 points to 71.99 cents.
December had spent July within a tight 400-point range between 69.40 and 73.40 cents and finished little changed for the month, down nine ticks from its June 29 close or 0.12 percent at 71.24 cents. The inability to sustain a move in either direction has frustrated both bulls and bears.
Macro factors buffeted the market ahead of the key USDA supply-demand report Friday. While another all-time high world carryout looms at the end of the 2012-13 marketing year, “free” available supplies outside China currently are tight and helped to underpin the market.
Cash grower-to-business sales climbed to 8,091 bales on The Seam from 3,884 bales the previous week. Prices rose to 69.50 cents from 65.14 cents, reflecting an advance to 16.71 cents from 13.67 cents in premiums over loan repayment rates. Daily price averages ranged from 57.22 to 71.44 cents.
Net U.S. all-cotton export sales were constructive on a combined 221,800 running bales for the 2011-12 and 2012-13 marketing years during the week ended July 26, up from 153,100 bales the previous week.
Old-crop sales of 44,800 bales lifted 2011-12 commitments to 12.693 million running bales, nearly 13 percent above the USDA estimate. Shipments of 310,500 running bales brought exports for the season to 11.285 million, roughly 33,000 above USDAΆs July projection, with five days left in the marketing year.
In statistical 480-pound bales, 2011-12 export commitments stood about 1.474 million above the USDA forecast.
New-crop sales of 177,000 running bales raised 2012-13 commitments to 2.904 million. This is about 25 percent of the USDA forecast. Unshipped 2011-12 commitments of 1.408 million bales plus the 2012-13 commitments totaled 4.312 million running bales. This total exceeded the 2012-13 beginning stocks, currently estimated at 3.3 million statistical bales.
Deteriorating U.S. crop conditions, rising dryland cotton stress in the West Texas Plains and reports of IndiaΆs monsoon rainfall falling 19 percent below the long-term average also offered support. India, the worldΆs second-largest producer, is reported to have begun importing cotton after a strong export pace earlier depleted its domestic supplies.
U.S. crop ratings for the week ended July 29 were the lowest of the season, with good to excellent falling three percentage points to 44 percent and poor to very poor rising four points to 22 percent.
The USDA report also showed cotton rated fair at 34 percent, down a point. Compared with 10-year averages, cotton rated good to excellent was eight points below and crops pegged poor to very poor four points above.
In Texas, poor to very poor cotton rose six points to 31 percent and good to excellent dropped three points to 34 percent. Some dryland cotton in the High Plains experienced early cutout, while disaster acreage declarations increased in the Coastal Bend where fields that failed to develop boll loads were shredded following crop insurance determinations.
In Georgia, good to excellent cotton increased a point to 59 percent, fair fell two points to 34 percent and poor rose a point to 7 percent.
Elsewhere, ratings held steady in Louisiana, Mississippi, Missouri and South Carolina; declined in Arizona, Arkansas, California, Kansas, North Carolina and Oklahoma; and improved in Tennessee and Virginia.
Nationally, cotton setting bolls advanced 12 points to 59 percent, three points ahead of the five-year average, while squaring cotton reached 93 percent, up three points on the week and from the 2006-2011 average.
Hot, dry conditions subsequently prevailed on the Texas High and Rolling Plains, which planted 80 percent of the cotton acreage in the Lone Star State and 43 percent of the U.S. cotton area. Temperatures reached as high as 106 degrees near Lubbock and 112 degrees in the Rolling Plains.
Harvesting expanded in the Rio Grande Valley and Coastal Bend. The Corpus Christi classing office had graded 16,405 bales as of July 26. Cotton tenderable on futures contracts totaled 59.7 percent.
Looking ahead, the exchange has announced that it will transition totally to electronic cotton options trading, effective with the close of business on Oct. 19.
This will end the 142-year-old tradition of floor-based open-outcry trading at the former New York Cotton Exchange, founded in 1870. Cotton futures trading on the IntercontientalExchange Inc. went fully electronic in March 2008 but options trading continued both electronically and via the floor.
The move isnΆt surprising, considering the diminished floor volume and its declining share of the options activity. But critics say the expertise and informational input provided by the floor will be a significant loss.
The exchange said it would maintain for now its New York facility for brokers who elect to use it. Atlanta-based ICE bought the New York Board of Trade in for about $1 billion in a deal that closed in early 2007.
Meanwhile, trend-following funds sold a net 3,589 lots in U.S. cotton futures with options during the week ended July 24 to cut their net long position by 49 percent, the Commodity Futures Trading Commission reported.
This reduced their net longs to 3,693 lots, smallest since June 12 when they were net short.
Index funds bought a net 338 lots to nudge their net longs up to 68,628, while small traders sold 1,159 lots to raise their net short holdings to 1,633 lots. Commercials bought a net 4,411 lots, adding 4,898 longs along with 487 shorts to reduce their net shorts to 70,857 lots.
