Cotton Rebounds to Settle With Strong Gains

Crop estimate of 4.4 million bales for the Texas High Plains, up 80% from last year, met some area skepticism. Dryland cotton which missed spotty showers has lost ground since Aug. 1 and an open fall still is needed for a promising irrigated crop.

Cotton futures finished with strong gains Wednesday, rebounding amid suspected overnight business from losses spawned by statistically bearish supply-demand estimates the prior day.

Benchmark December settled up 135 points to 64.72 cents, in the upper third of its 181-point range from up nine points at 63.46 cents to up 190 points at 65.27 cents. It pushed through last weekΆs high and closed at its highest settlement since July 29.

Volume reached an estimated 17,438 lots, against 18,436 lots the previous session when spreads accounted for 4,918 lots or 27%, EFS 262 lots and EFP 261 lots. Options volume totaled 1,734 calls and 4,155 puts.
A USDA estimate for a Texas High Plains crop of 4.4 million bales, up 1.954 million bales or 79.9% from last season, met some area skepticism.

The estimate — more than the entire state produced last year — is based on conditions around Aug. 1, and observers say a sizable acreage of dryland cotton which missed spotty showers has lost ground since then.

Some moisture-stressed dryland acreage is blooming at or near the tops of plants, nearing early cutout, and abandonment is expected to rise unless broader rain coverage is received soon. Dryland acres comprised 62% of the planted area last year.

Irrigated cotton still shows “good promise,” observers say, but also will need an open fall to achieve its yield potential. September often is a “make or break” month for irrigated cotton, while August frequently can be the same thing for the dryland crop.

The USDA projected acres for harvest at 3.280 million, up from 1.674 million last year, with abandonment estimated at 800,000 acres or 19.6% off plantings of 4.080 million acres. Growers last year planted 3.751 million acres and abandoned 55.4%.

Yields per acre are expected to average 644 pounds, down from 701 pounds last year when irrigated acreage was 61% of the harvested area.

The High Plains crop is estimated at 62% of the Texas output and 25% of the U.S. upland production. The Texas upland crop of 7.1 million bales is up 70% from last year, with yields expected to average 631 pounds, against 646 pounds in 2013.

Acres for harvest in the top cotton-producing state are estimated at 5.4 million, up 74% from last year, reflecting an abandonment of 16% from plantings of 6.45 million acres, up from 5.8 million.

Futures open interest fell 975 lots Tuesday to 164,588, with DecemberΆs down 2,085 lots to 115,299 and MarchΆs up 1,093 lots to 39,018. Certificated stocks declined 1,746 bales to 93,972.

World values as measured by the Cotlook A Index dropped 95 points Wednesday morning to 72.95 cents, widening the premium to TuesdayΆs December futures settlement premium by eight points to 9.58 cents.

CORRECTION: Regional upland crop estimate changes from last yearΆs output reported here Tuesday were incorrect. Upland production is expected to climb 1.038 million bales to 5.4 million in the Southeast, 590,000 bales to 3.265 million in the Mid-South and 3.170 million bales to 7.535 million in the Southwest, while falling 127,000 bales to 746,000 in the West.