A robust dollar index exerted pressure as cotton futures snapped a four-session streak of higher closes in light dealings last week.
Benchmark December dipped 75 points from the prior calendar week close to settle at 70.58 cents on Thursday. This was just above the midpoint of its five-week range from about 65 to 75 cents. It closed back below its 40-day moving average after a one-day stand above it.
December extended gains from a weekly reversal up the prior week and reached a high of 72.75 cents Thursday, up 559 points from the prior weekΆs low, before skidding as the dollar surged after economic stimulus measures by major central banks failed to spur confidence.
Unexpected interest rate cuts in China, the second in a month, were seen as indicating some concerns among authorities there about slowing growth. China, the worldΆs second-largest economy and largest cotton importer, is in its deepest economic slump since the 2008 global crisis.
Cotton slid even as grains again exploded amid plunging corn and soybean crop conditions. December corn hit a contract high for the second straight session, settling at $7.08, and November beans posted a new contract high for the sixth time in eight days, closing at $15.26. Wheat also posted strong gains.
New-crop grains prices are likely to draw a lot of acres from cotton next season, starting with Southern Hemisphere plantings at the end of the year, many analysts agree. The ratio between November soybeans and December cotton expanded to a bulging 21.6-to-1.
July was in its death throes, as one analyst put it, and many were going to be glad to see it expire. Its wild swings just prior to the delivery notice period — after options had expired — “reminded us more of a casino than a legitimate hedging vehicle,” one trade analyst commented.
Cash grower sales jumped to 5,671 bales for the holiday-abbreviated trading week from only 268 bales the previous week on The Seam as prices climbed to an average of 62.85 cents from 53.34 cents. Daily price averages ranged from 55.43 to 65.18 cents.
On the U.S. crop scene, attention focused mainly on reports on crop conditions and potential abandonment after USDA estimated plantings at 12.635 million acres, down 14 percent from 14.735 million last year.
The estimate, down from intentions of 13.133 million acres in March when cotton prices were higher, was in line with expectations. Upland acres fell 14.1 percent to 12.4 million from 14.428 million and Pima or extra long staple acres fell 23.6 percent to 235,000 from 307,000.
By regions, producers cut upland plantings by 21.6 percent to 2.67 million acres in the Southeast, 13.3 percent to 2.145 million in the Mid-South, 10.7 percent to 7.185 million in the Southwest, and 20.3 percent to 400,000 in the West. Growers cut acres in every state except Missouri where the acreage was unchanged.
Producers in Texas planted 6.8 million acres of upland, 10 percent below last yearΆs 7.55 million acres. Corn acreage fell 7 percent to 1.9 million and sorghum plantings jumped 48 percent to 2.3 million acres.
Growers reduced cotton plantings by 9 percent to 4.15 million acres on the Texas High Plains and by 2 percent to 1.31 million in the adjoining Rolling Plains. Combined, the 5.46 million acres planted in the high-risk High and Rolling Plains accounted for 80 percent of the Texas upland acres and 44 percent of the U.S. upland area.
U.S. crop ratings continued to deteriorate during the week ended July 1, according to USDAΆs crop progress and conditions report, with good to excellent down three percentage points to 47 percent, poor to very poor up two points to 18 percent and fair up a point to 35 percent. A decline had been expected.
The good-excellent cotton fell a point below the 10-year average, the first time this season it has been below that mark. Conditions have declined five consecutive weeks.
Ratings in Texas showed good to excellent and fair down a point each to 35 percent and 39 percent, respectively, and poor to very poor up two points to 26 percent.
Squaring cotton nationally advanced seven points to 49 percent, up five points from last year and a point above the five-year average. Cotton setting bolls rose six points to 14 percent, up two points from a year ago and the average.
Meanwhile, speculators reduced their net short futures position by 0.5 of a point during the week ended June 29 to 4.9 percent of the open interest, according to the exchangeΆs spec-hedge report.
Speculators owned 53 percent of the shorts, down 0.1-point, and 48.1 percent of the longs, up 0.6-point. They increased shorts by just 170 lots while increasing longs by 1,015 lots. This reduced their net shorts by 845 lots to 8,160. They owned 88,177 outright shorts and 80,017 outright longs.
Commercials liquidated 943 long hedges and covered 98 short hedges. This left them with 86,473 longs and 78,313 shorts. Open interest edged up 72 lots to 166,490.
This was the exchangeΆs final weekly spec-hedge report. The exchange had announced that it would discontinue the report after July 2.
In the news, Mark Allen, a former leader of the Glencore International PLC cotton trading team, has sued commodity trading giant Louis Dreyfus Commodities BV, alleging Dreyfus artificially inflated prices of cotton futures contracts expiring in May 2011 and July 2011, Reuters reported.
Defendants also include DreyfusΆs Allenberg Cotton Co. and Term Commodities units, among others. The lawsuit alleges Dreyfus and other defendants used “monopoly power and collusion,” Reuters said.
Louis Dreyfus had no immediate comment.
The suit was filed as a proposed class action on behalf of all traders who may have lost money from the alleged manipulation.
