Cotton Extends Prior DayΆs Bearish Reversal
A strong U.S. dollar index contributed pressure. Traders looked ahead to the U.S. weekly export sales report. U.S. cotton groups hailed House passage of Export-Import bank reauthorization.
U.S. cotton futures extended the prior dayΆs bearish reversal on heavy volume Wednesday as spot December fell to its lowest close since Oct. 12.
December settled down 63 points at 61.94 cents, near the low of its 109-point range from up 32 points at 62.89 to down 77 points at 61.80 cents. It finished three ticks above last weekΆs low. March closed down 42 points to 62.02 cents.
Pressure stemmed partly from a strong U.S. dollar index as remarks by Federal Reserve Chair Janet Yellen sparked new conjecture that the central bank would raise interest rates next month if U.S. economic growth continued to improve. A strong dollar makes commodities denominated in the greenback less affordable for holders of other currencies.
Volume quickened to an estimated 48,400 lots from 34,541 lots the previous session when spreads accounted for 18,458 lots or 53%, EFS 87 lots and EFP 48 lots. Options volume totaled 7,340 calls and 3,431 puts.
Traders looked ahead to USDAΆs weekly export sales report scheduled for release at 7:30 a.m. CST Thursday. Recent reports have shown lackluster sales lagging the pace needed to achieve USDAΆs export forecast, which at 10.2 million statistical bales is down 9.3% from last season and the lowest since 2000-01.
Sales during the prior four weeks have averaged a rounded 111,800 running bales and shipments have averaged 80,650 RB. Spot December prices ranged on a closing basis during the new reporting week between 62.13 and 62.76 cents. Intraday high-lows ranged from 61.91 to 63.18 cents.
Meanwhile, U.S. cotton industry groups have applauded House passage of Export-Import Bank reauthorization.
The House utilized a discharge petition, a seldom-used procedure to force a bill out of the committee of jurisdiction and bring it directly to the House floor for a vote. The House passed the bill on a strong bipartisan vote of 313 to 118.
Rep. Stephen Fincher, R-Tenn., initiated the discharge petition, which requires at least 218 signatures. He and other supporters worked several weeks to build support to move his bill to reauthorize the Ex-Im Bank through 2019. The Ex-Im authority expired at the end of June.
The National Cotton Council, Amcot, American Cotton Shippers Association and the National Council of Textile Organizations had joined in urging the reauthorization.
In a letter sent to all Cotton Belt House membersΆ offices, the groups said the Ex-Im Bank is a critical financing tool for the domestic cotton and textile industries, both of which are primarily reliant on being able to export a majority of U.S. production.
More than 80% of U.S cotton fiber production is exported, the groups said. When combined with cotton products manufactured by the textile industry, approximately 95% of all U.S. cotton is exported in some form.
Three segments of the U.S. cotton industry primarily utilize Ex-Im Bank as part of their business, the letter noted, including textile mills, marketing cooperatives and merchants.
The bank plays a key role in the ability to remain competitive with other major cotton and textile producing countries.
The Senate earlier included Ex-Im reauthorization in its version of the highway-surface bill. The most likely path for reauthorization to be enacted this year is said to be a final House-Senate highway-surface transportation measure.
Futures open interest dropped 379 lots Tuesday to 199,327, with DecemberΆs down 4,082 lots to 98,434 and MarchΆs up 2,272 lots to 73,031. Cert stocks declined 864 bales to 42,353. There were 2,038 newly certified bales, 2,902 decertified bales and 5,841 bales awaiting review.
