By Duane Howell
Steep losses in equities and commodities, perceptions of improving U.S. crop conditions and technically oriented selling pressured cotton futures last week amid positioning for the July delivery period.
Most-active December lost 379 points during the week ended Thursday to close at 85.36 cents, just below a 50 percent retracement (85.64) of the 718-point June rally from 81.72 to 89.56 cents.
December entered the calendar week having posted back-to-back closes just above its mid-March high of 89.20 cents, but then settled lower four sessions in a row and ended even with its 50-day moving average.
July, which enters its delivery notice period on Monday, shed 680 points to settle at 84.92 cents, finishing at a 44-point discount to December after closing a week earlier at a 257-point premium.
Certified stocks in deliverable position grew 14,700 bales on the week to 550,928, with 61,815 bales awaiting review. Open interest coming into ThursdayΆs session had fallen 45,878 lots to 12,765 in July, expanded 25,666 lots to 145,931 in December and declined 16,834 lots on the board total to 173,371.
Losses in the economically sensitive cotton market late in the week stemmed partly from a selloff in world equities and dollar-denominated commodities on indications the Federal Reserve would begin reducing the pace of its massive stimulus this year as the economic outlook improves.
A private report showing manufacturing activity in China slumped to a nine-month low in June added to demand concerns and worries about slowing growth in the worldΆs second-largest economy and largest cotton consumer.
Widespread rains boosted spirits on the Texas High Plains and contributed to perceptions of improved crop prospects but also brought damaging hail, strong winds and blowing dust. The rains were the heaviest and most widespread of the year.
Hail stripped some 10-inch-tall irrigated cotton in Lynn County but some other damaged cotton was believed likely to recover with favorable weather. Overall losses were undetermined.
The rain was especially welcome in areas with small irrigation wells where supplemental rain is essential for optimum yields. Lack of subsoil moisture coming into the planting season means dryland cotton will be particularly dependent upon timely additional rain to make acceptable yields, growers say.
U.S. cotton planting advanced seven percentage points to 95 percent completed and crop conditions held essentially steady during the week ended June 16, USDA data indicated.
Planting progress narrowed the lag behind a year ago to three points and to two points behind average, with Texas at 95 percent planted only two points behind last year and even with the 2008-12 average.
Crop ratings were unchanged from a week ago at 8 percent excellent, 34 percent good and 6 percent very poor, with poor down two points at 13 percent and fair up a like amount to 39 percent. The 42 percent good-excellent was down from 53 percent a year ago and 50 percent for the 10-year average.
Squaring cotton totaled 10 percent, down from 26 percent a year ago and 19 percent for the five-year average. In Texas, 3 percent was setting bolls, against 9 percent a year ago and the 2008-12 average of 8 percent.
Looking ahead, traders will focus on USDAΆs updated planted acreage report, scheduled for release Friday, June 28. This report will include actual plantings as of early June as well as acres still intended for planting.
Informa Economics, Memphis-based analytical firm, has estimated U.S. plantings at 10.371 million acres, sources said, up from 10.026 million acres forecast by USDA but down from 12.315 million acres in 2012.
Upland plantings were estimated at 10.155 million acres, up from 9.82 million acres forecast by USDA. The USDA earlier this month carried forward in its supply-demand report the acreage estimate from the March intentions, which showed a reduction of 19 percent from last year.
The largest upland increase foreseen by Informa is in Texas with 5.7 million acres, up from 5.5 million forecast by USDA but down from 6.55 million acres in 2012.
Based on projections earlier this month, USDA forecast the harvested area at 8.1 million acres, down 300,000 acres from the previously foreseen area and reflecting an abandonment of 19 percent. Historically, the Southwest has accounted for the bulk of the U.S. abandonment.
The USDA projected abandonment in the Southwest at 32 percent, above the 10-year average of 25 percent but about half the rate sustained in 2011. The U.S. yield forecast remained at 800 pounds, compared with 887 pounds in 2012-13 and the five-year average of 817 pounds.
On the demand side, net U.S. all-cotton export sales for delivery this season and next fell to 152,400 running bales during the week ended June 13 from 201,900 bales the week before, USDA reported.
Old-crop sales dropped to 71,000 bales from 102,900 bales, with upland sales of 69,800 bales down 31 percent from the previous week and 45 percent from the prior four-week average. Upland gross sales were 76,100 bales and cancellations were 6,300 bales. New-crop sales slipped to 81,400 bales 99,000 bales.
Shipments dipped to 212,700 bales from 252,500 bales, with upland exports of 187,900 bales down 19 percent from the previous week and 28 percent from the prior four-week average.
Meanwhile, trend-following funds bought 3,358 lots in futures-options combined during the week ended June 11 to raise their net longs by 8 percent to 45,302 lots. Index funds sold a net 579 lots to shave their net longs to 70,878 lots, while traders with non-reportable positions bought 3,957 lots to boost theirs to 6,967 lots.
Commercials sold a net 6,736, adding 8,057 shorts along with 1,321 longs to boost their net shorts to 123,147 lots. In futures only, non-commercials trimmed their net longs by 0.9 percentage point to 26.1 percent of the open interest.