By Duane Howell
Solid U.S. export sales — coming on the heels of back-to-back weeks of crop year highs in new business — have helped to lift cotton futures to a five-week high.
Most-active March gained 192 points from the prior calendar week close to finish Thursday at 73.35 cents, its highest close since Oct. 23 and above its 50-day moving average. At its high of 73.98 cents, March had risen 419 points or 6.1 percent from its four-month low on Nov. 9.
Maturing December also rose 192 points, closing at 71.75 cents, after deliveries appeared moving into strong hands. Open interest declined sharply heading into first notice day.
Term Commodities, trading arm of Allenberg Cotton Co., issued all first-day December delivery notices of 197 or 19,700 bales and Newedge USA stopped 167 or 85 percent for a customer, believed another commercial. Notices through Thursday totaled 379 or 37,900 bales.
Cash grower-to-business sales surged to a marketing year high of 116,050 bales on The Seam from 83,900 bales the previous week. Prices edged up 20 points to average 67.59 cents, reflecting a 62-point gain to 14.39 cents in premiums over loan repayment rates. Daily price averages ranged from 65.98 to 68.35 cents.
Net all-cotton export sales for shipment this season of 310,900 running bales during the week ended Nov. 22 brought business consummated during the last three reporting weeks to a bulging 1.153 million.
Commitments have reached 7.511 million running bales, 67 percent of the USDA export forecast. Sales for delivery next season of 211,900 running bales during the three-week span have boosted 2013-14 commitments to 483,900 bales, 87,700 bales ahead of forward bookings a year ago.
Shipments remained sluggish at 142,200 running bales, hiking exports for the season to 2.44 million. Even with the slow pace thus far, shipments at 22 percent of the USDA estimate are up from 16 percent of final shipments at the corresponding point last season. To achieve the estimate, shipments need to average roughly 251,800 running bales a week.
Current-crop weekly upland sales of 303,300 bales included 83,300 bales or 28 percent to China, 63,100 bales to Mexico, 54,900 bales to Turkey, 35,900 to Pakistan, 10,200 to South Korea and 8,500 to Peru.
Out in the countryside, producers are evaluating revisions in crop insurance, a vital farming cog.
A USDA Risk Management Agency conference call with commodity groups indicated average 2013 crop insurance premium rates for upland cotton will not change but the average of individual states will see varying increases and decreases.
New rating methodology used for corn and soybeans last year will be expanded to include cotton in 2013. Premium rates for Pima cotton also will be affected but RMA has not yet generated that data.
The RMA announced in November 2011 it would update crop insurance premiums based on findings of an independent study and peer review process. In general, the study recommended that RMA give more weight to recent years rather than giving equal weight to all years back to 1975.
While moving cotton and other commodities to the new methodology, the RMA also updated various rate factors that “individualize” the county base rate to a specific growerΆs situation as a normal course of business, according to the National Cotton Council.
The new rates will update the premium subsidy percentage at varying levels of coverage to reflect recently accumulated loss data. There will be an update of county reference yields (midpoint average of the county). Growers above the reference yield have a discount and those below a surcharge.
With this update, RMA now is using data from the insurers and not from the USDA National Agricultural Statistics Service. The agency now has considerably more prevented planting information and updated the loads to reflect actual experience.
Producers will have the option of an actual production history yield trend adjustment for the 2013 crop year. This initially will be available only in major growing counties. The adjustment was offered to corn and soybean producers last year and had a 55 percent participation rate.
After all these adjustments, RMA determines the target rates for commodity and county but this only reflects information through the 2011 crop year. The agency will phase in the new rates, limiting year-to-year premium changes to limit potential increases owing to significant 2012 drought losses. This is to help keep premiums stable and provide predictable rates.
For 2013, RMA will fully implement targets that result in 15 percent or less change (increase or decrease) in yield protection premium on average. The agency will partially implement targets beyond 15 percent, not to exceed the maximum of 20 percent change on average.
Farmers generally can expect a rate increase if they make a claim because of drought, a crop insurance source said.
On the crop scene, the U.S. harvest advanced a slowed five percentage points during the week ended Nov. 25 to 89 percent complete, a point behind a year ago but four points ahead of the five-year average.
Harvesting progressed at a seven-point pace in Texas and a six-point clip in Georgia to 87 percent and 79 percent complete, respectively. The percentages off the stalk are 11 points ahead of the 2007-2011 average in Texas and even with the average in Georgia.
Meanwhile, trend-following funds bought a net 7,274 lots in cotton futures with options during the week ended Nov. 20 to reduce their net short position by 42 percent to 5,171 lots, according to the latest Commodity Futures Trading Commission data.
Index funds sold 1,334 lots to cut their net longs to 68,836 lots, while non-reportable traders sold a net 1,418 lots to reverse to net short 496 lots from net long 922 lots.
Commercials sold a net 4,522 lots, raising their net shorts to 63,170 lots by liquidating 11,179 longs and covering 6,657 shorts.
