DTN Cotton Close: Modest Gain After Hitting Rally High

DTN Cotton Close: Modest Gain After Hitting Rally High

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Preliminary trade estimates put Texas cotton losses around 500,000 bales. Some growers likely face 100% loss and others the task of selling degraded cotton at a heavily discounted price, extension specialist says. Harvested cotton insurance situation clarified.

Cotton futures traded on both sides of unchanged, touched a new intraday high since Aug. 10 and settled modestly ahead Tuesday, notching the eighth gain in the last nine sessions in December.

December closed up 15 points to 69.98 cents, just above the midpoint of its 113-point range from down 50 points at 69.33 to up 63 points at 70.46 cents. It posted a new high close since Aug. 9.

March edged up 18 points to settle at 69.38 cents, trading within a 90-point range from 68.85 to 69.75 cents. The other months finished up 25 points to down a point, with October up 23 points to 70.56 cents.

Volume increased to an estimated 24,760 lots from 21,660 lots the prior session when spreads accounted for 8,024 lots or 38%. Options volume dipped to 5,266 lots (3,504 calls and 1,762 puts) from 5,308 lots (2,775 calls and 2,533 puts).

Some preliminary trade estimates thus far have suggested that cotton losses in Texas due to Hurricane Harvey, and the tropical storm it spawned, may be around 500,000 bales, based on USDA’s August production forecasts and not including degradation of quality.

Reports of high yields and high quality from South Texas prior to the hurricane have indicated USDA may have underestimated the crop, contrary to some early reactions to the initial U.S. production projections. Some gins had expected record volumes.

John Robinson, Texas AgriLife Extension cotton marketing specialist, said in his latest newsletter that he has heard estimates that cotton in the Texas regions affected by the storms was only 30% to 40% harvested with 300,000 to 400,000 bales still on the stalk.

Some of those growers likely “face a 100% loss” and others “still face the uneconomical task of drying out, harvesting and selling degraded cotton lint at a heavily discounted price,” he said. Either one of those outcomes, he added, “will be a disaster at the farm level.”

Robinson said the futures market, which hit a couple of rally highs the last three sessions, “will likely settle down once the uncertainty fades from this event.” He expects the cash market to reflect higher premiums for good quality cotton the next couple of months.

Discussions with USDA’s Risk Management Agency officials at Kansas City have clarified that cotton either on the stalk or in harvested modules in the field still was eligible for insurance indemnities if destroyed before leaving the field, says the National Cotton Council.

Losses of unginned cotton would be reflected in a producer’s actual production history calculations. Additionally, an RMA managers’ bulletin was issued that allows a grower to move a module from the field to a safer location, including the gin yard, if prior notice and permission is received from the insurance company.

The RMA is checking procedures to determine a process for APH calculation for cotton under the gin’s control that was destroyed prior to ginning. Producers were advised to consult their ginner as to liabilities for module coverage of unginned cotton under gin control.

Harvey ripped tarps off conventional modules of field-stored seed cotton and scattered the contents. Round bales appeared to fare better, but some of them were standing in water.

The Texas crop was pegged earlier this month at 8.8 million bales, up 9% from last season’s 8.1 million bales. Yields were estimated at an average of 741 pounds per acre, compared with 748 pounds in 2016 and the five-year average of 659 pounds.

Futures open interest declined 1,601 lots to 224,941 on Monday, with December’s down 1,470 lots to 144,672 and March’s down 125 lots to 56,356. Certified stocks dropped 876 bales to 9,832 bales. Cotton at the Houston and Galveston delivery points was inaccessible, the exchange said. Cert stocks were 165 bales at Houston and 1,213 bales at Galveston.

Source: http://agfax.com/2017/08/29/dtn-cotton-close-modest-gain-after-hitting-rally-high/



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