Buying attributed largely to funds and speculators on technical considerations lifted cotton futures to new 2013 highs in the May, July and December contracts last week.
Most-active May gained a modest 44 points for the week ended Thursday to close at 83.23 cents, while spot March edged up 29 points to 81.31 cents, July rose 47 points to 84.18 cents and December added 62 points to 83.62 cents.
The May contract posted an intraday high of 85.24 cents, highest since May 2012, but the inability of March to challenge its January high of 84 cents and the widening of its discount to May helped to cap the rally. May filled part of a large gap left May 10 up to 85.54.
Cotton sagged when the dollar surged after minutes of the Federal Open Market CommitteeΆs meeting last month showed some policymakers said the central bank may have to stop or slow its bond-buying program before the job market improves. Cotton frequently trades counter to the dollar.
Spreading and rolling of March contracts forward continued to make up a large slice of the daily volumes prior to first notice day for March deliveries on Friday. The March-May spread traded as wide as 218 points, May over, beyond full carrying charges. March had traded out to a premium of 115 points on Jan. 25.
A steady buildup in deliverable stocks reached 307,381 bales, largest since July 2010, with 53,160 bales awaiting review. Open interest in March going into ThursdayΆs session had fallen to 5,581 lots.
Cash grower-to-business trading quickened to 26,456 bales from 12,611 bales the previous week. Prices gained 69 points to average 76.36 cents, while premiums over loan repayment rates rose 88 points to 24.62 cents. Daily price averages ranged from 70.89 to 78.14 cents.
Traders noted that projections at USDAΆs Agricultural Outlook Forum included U.S. all-cotton plantings of 10 million acres in 2013-14, production at 14 million bales and an average price of 73 cents.
These forecasts compare with this seasonΆs all-cotton planted area of 12.32 million acres, production of 17.01 million bales and farm prices estimated at a midpoint average of 71 cents.
A National Cotton Council planting intentions survey from mid-December through mid-January put the planted area at 9.015 million acres. The USDAΆs prospective plantings report will be released in late March.
Many industry people doubt that plantings will fall 25 percent to 4.91 million acres in Texas, as indicated in the NCC survey.
Wheat conditions in Texas are among an array of factors widely expected to affect decisions on the size of the acreage that will be planted to cotton this spring.
A lot of wheat on the Texas High Plains “looks bad” and a significant acreage likely wonΆt be carried to harvest for grain for various reasons, including crop failures, discussions at an advisory group meeting of the Lubbock-based Plains Cotton Growers, Inc., indicated.
Growers seeded 2.69 million acres for the 2013 winter wheat crop on the High Plains and planted 1.57 million acres in the adjoining Rolling Plains. The combined 4.26 million acres accounted for 73 percent of statewide plantings of 5.8 million acres, up 2 percent from last year.
Some growers on the Plains plant wheat purely for cover to prevent soil erosion or for grazing for cattle but can decide to carry the crop to harvest if production prospects and prices are favorable. Complicating decision-making is that wheat in poor condition could make a remarkable recovery with some rain in March and April, agronomists have pointed out.
The stateΆs wheat crop as of last Sunday was rated 53 percent fair to poor, with 23 percent very poor and 14 percent good to excellent. Winter wheat emergence totaled 97 percent, compared with 99 percent a year ago and the five-year average of 98 percent.
Most areas needed additional moisture, according to the weekly crop progress and condition report from the Texas field office of USDAΆs National Agricultural Statistics Service.
Topsoil moisture was short to very short in 89 percent and 87 percent of the northern and southern High Plains districts, respectively, and in 88 percent and 100 percent in the northern and southern Rolling Plains.
However, small grains responded positively to recent precipitation in the Blacklands and East Texas and showed moderate growth. Wheat also showed positive results under irrigation in South Texas.
Meanwhile, trend-following funds have continued piling on new longs, according to the latest supplemental traders-commitments data from the Commodity Futures Trading Commission.
They bought 3,453 lots in futures-options combined during the week ended Feb. 12 to raise their net long position by 5.4 percent to 66,935 lots, a new high since September 2010. These funds have increased their net longs five consecutive weeks and nine of the last 10.
Index funds purchased 4,161 lots to boost their net longs to 78,015 lots, while traders with non-reportable positions sold 1,179 lots to reduce their net longs to 16,317 lots.
Commercials sold a net 6,435 lots, liquidating 18,286 longs and covering 11,851 shorts to raise their net short position to 161,268 lots.
Since the CFTC report, with March in liquidation, futures open interest fell 52,008 lots in March but increased 42,337 lots in the other contracts. Thus overall open interest had dipped a relatively light 9,671 lots going into ThursdayΆs session. This suggested to some analysts something of a continuing standoff between fund longs and trade shorts.
On the current-crop scene, U.S. all-cotton outstanding loans fell 266,141 bales to 3,684,289 during the week ended Feb. 12. Entries were 80,890 bales and redemptions increased to 347,031 bales.
An unknown amount of the cotton under loan has been committed and is awaiting the approach of shipping dates to be redeemed. Mills have continued hand-to-mouth buying and their cotton inventories are low.