By Duane Howell
Bearish forces have overridden robust export sales to drive cotton futures to the largest monthly loss since the spring of 2012 and a new spot continuation low close since mid-January.
Spot December shed 203 points for the week ended Thursday to close at 77.18 cents, its 10th lower finish in a row. March lost 160 points to settle at 79.20 cents. Index funds rolled longs from December in earnest, contributing to widening its settlement discount to March to 202 points.
Cash grower-to-business sales hit a new crop-year high of 11,141 bales on The Seam, up from 6,878 bales the previous week. Prices fell to an average of 78.22 cents from 80.39 cents as premiums dropped to 23.57 cents from 26.89 cents over higher loan repayment rates of 54.65 cents. Daily price averages ranged from 80.76 to 77.37 cents.
The physical basis on the base quality continued to firm, led by a narrowing to 68 points off December in West Texas and East Texas-Oklahoma.
December, which had posted lower highs eight sessions in a row, rallied to a triple-digit point gain and a three-day high on the heels of larger-than-expected export sales data reported by USDA.
But then the market made a bearish outside-range reversal, chewing through scale-down mill fixations and trade buying amid ongoing long liquidation. December lost 10.03 cents, or 11.5 percent, for the month, the biggest monthly decline since May 2012.
Net all-cotton export sales jumped to 690,900 running bales during the three-week period ended Oct. 24. These were 2.5 times the previous three-week sales of 274,100 bales.
Upland net sales of 612,300 bales, up from 174,800 bales, reflected gross sales of 618,000 bales and cancellations of 5,800 bales. China bought 238,600 bales, or 39 percent, Turkey booked 151,000 bales and Indonesia bought 51,600 bales.
All-cotton shipments fell to 250,300 running bales from 349,300 bales, with upland exports slipping to 231,400 bales from 326,600 bales. The top upland destinations were China, 47,500 bales; Mexico, 41,600; and Turkey, 35,200.
To achieve the USDA export estimate, shipments need to average roughly 213,500 running bales a week. Sales averaging around 131,200 running bales a week would match the estimate, not considering quality mixes and other balancing factors.
Net sales of 13,300 running bales for 2014-15 included 9,300 bales for Thailand and 4,000 for Turkey. Upland commitments of 171,900 bales were down from forward bookings a year ago of 262,100 bales.
All-cotton 2013-14 commitments reached 4.972 million running bales, down 1.115 million bales or 18 percent from a year ago. Commitments were 49 percent of the USDA estimate, against 48 percent of final shipments at the corresponding point last season.
Cumulative all-cotton shipments stood at 1.762 million running bales, 146,000 bales, or 7.7 percent, behind year-ago exports. Shipments were almost 18 percent of the USDA forecast, compared with about 15 percent of final 2012-13 exports a year ago.
On the crop scene, U.S. all-cotton ginned as of Oct. 15 of 1,145,800 running bales amounted to only 38.9 percent of the 2,942,600 bales processed a year ago, USDA also reported.
The mid-October count was down from 3,467,450 bales in 2011 and 4,715,800 in 2010. Gins in Texas had processed 572,600 bales, down from 1,112,050 a year earlier, 1,367,850 in 2011 and 1.364 million in 2010.
U.S. harvesting progressed 13 percentage points during the week ended Oct. 27 to 34 percent completed, 13 points behind a year ago and 10 points behind the five-year average.
The harvest advanced to 31 percent done in Texas, up from 15 percent a week earlier but behind 40 percent in 2012 and 34 percent on average, and to 26 percent in Georgia, up from 16 percent but down from 36 percent and 38 percent, respectively.
Boll opening at 92 percent was behind 96 percent a year ago and 94 percent on average. Cotton was below 90 percent open in Georgia at 89 percent, Kansas at 85 percent, Oklahoma at 89 percent and Missouri, South Carolina and Tennessee, all at 84 percent. Crops were 100 percent open in Arizona, Arkansas, Louisiana, Mississippi and Virginia.
Condition of cotton remaining on the stalk declined slightly, with good to excellent steady at 44 percent, fair down two points at 32 percent and poor to very poor up two points to 24 percent. The DTN crop condition index dipped to 92 from 102 a week earlier but was up from 82 a year ago.
Cotton lost ground in Texas as good to excellent fell three points to 29 percent, fair dropped two points to 36 percent and poor to very poor rose five points to 35 percent.
Yet early expectations generally suggested an increase in the U.S. production forecast from USDA on Nov. 8.
Meanwhile, trend-following funds sold a net 8,538 lots to reduce their net longs in futures-options combined to 36,871 lots during the week ended Oct. 15, according to delayed traders-commitments data reported by the Commodity Futures Trading Commission.
This marked the second week of long liquidation after those funds had built their largest net long position since Aug. 27. Index funds sold 1,695 lots to cut their net longs to 67,512, while traders with non-reportable positions sold 3,023 lots to chop theirs to 2,230 lots.
Commercials bought 13,256 lots, covering 10,436 shorts and adding 2,820 longs to reduce their net shorts to 106,612. In futures only, non-commercials reduced their net long position by 3.3 percentage points to 22.9 percent of the declining open interest.
In another delayed report, CFTC data showed that unfixed on-call positions in December fell 3,923 lots to 18,311 on the mill side and 70 lots to 8,268 on the producer side during the week ended Oct. 11.
The net call difference narrowed 3,853 lots to 10,043, which represented 8.1 percent of DecemberΆs open interest, down from 10.4 percent a week earlier. Unfixed mill positions outweighed those of producers by a ratio of 2.21:1.
