Crops in many areas of Texas reported doing well but 70% of the state remains in drought. El Nino forecast weaker than earlier predicted.

Cotton futures settled higher Wednesday as July continued to widen its premium over December as first notice day approaches.

July settled up 109 points to 91.15 cents, its highest finish since May 12 and in the upper quarter of its 141-point range from down four points at 90.02 to up 137 points at 91.43 cents.

December closed up 87 points to 77.19 cents, finishing in the upper reaches of a 124-point inside-day range from down 19 points at 76.13 to up 105 points at 77.37 cents.

The July-December spread gained 22 points to close 1,396 points, a new high settlement for the second straight day.

Volume slowed to an estimated 24,700 lots from a final 39,811 lots the previous session when spreads accounted for 22,559 lots or 57%, EFP for 2,668 lots and EFS for 680 lots. Options volume totaled 3,778 calls and 3,324 puts.

Crops in many areas of Texas are doing well thanks to rains over the last month, though nearly 70% of the state remains in drought, according to reports from the Texas AgriLife Extension Service and the U.S. Drought Monitor.

Many county agents have described crop conditions as good or even excellent, an extension report said, but the consensus was that more rain would be needed soon to maintain growth and meet yield expectations.

“WeΆve basically had a lot of good rain in areas that had been particularly hard hit by drought,” said John Nielsen-Gammon, state climatologist at College Station. “But it takes a lot more than that to actually get them out of drought completely.”

For now, it appears the best chances of summer rain are going to be in the northern and northwestern areas, he said, which would encompass the Texas High Plains cotton region.

But whatΆs needed to give real drought relief is enough rain to recharge the subsoil moisture profile and refill reservoirs and lakes, Nielsen-Gammon said. And the best chances for that come from an El Nino this fall, he indicated.

A moderate to strong El Nino usually means more moisture to parts of the Southwest and Southeast during the late fall and winter.

In early May, the National Aeronautics and Space Administration predicted a very strong El Nino, Nielsen-Gammon said. But recent computer models arenΆt so enthusiastic, he said.

“More likely, weΆll end up with a weak to moderately strong El Nino,” the climatologist added.

This would mean much of Texas still could have a wetter than normal fall and winter — just not as wet as it might be with a very strong El Nino, he added.

Futures open interest fell 6,298 lots Tuesday to 173,633, with JulyΆs down 8,428 lots to 32,009 and DecemberΆs up 1,668 lots to 121,904. Cert stocks grew 4,036 bales to 420,728. There were 4,309 newly certified bales, 273 bales decertified and 23,798 bales awaiting review.

World prices as measured by the Cotlook A Index gained 105 points Wednesday morning to 92.75 cents. The premium to TuesdayΆs July futures settlement narrowed 136 points to 2.69 cents.

Forward A Index values for 2014-15 fell 70 points to 83.60 cents, widening the discount to the 2013-14 index by 175 points to 9.15 cents and the premium to TuesdayΆs December futures close by 10 points to 7.28 cents.