Showers and thunderstorms forecast for the Texas High Plains. Delayed export sales report scheduled Friday. Exports fell in July. Cotton producers enroll in transition program.
Cotton futures completed an outside-range reversal to the downside in benchmark December in slow dealings Thursday amid dollar index strength.
December closed down 51 points to 65.45 cents, just off the low of its 107-point range from up 49 points at 66.45 — above highs of the prior two days — to down 58 points at 65.38 cents. Dollar strength decreases U.S. cottonΆs competitive price position in export markets.
The dollar index extended gains against a basket of currencies after the European Central Bank unexpectedly cut ultra-low interest rates and said it would start buying loans and bonds next month.
Volume slumped to an estimated 9,600 lots from 18,183 lots the previous session when spreads accounted for 6,891 lots or 38%, EFS 282 lots and EFP 66 lots. Options volume totaled 1,242 calls and 703 puts.
On the weather scene, chances for showers and thunderstorms are forecast to increase on Friday on the Texas High Plains and continue through the weekend, bringing a possibility of locally heavy rainfall.
Rainfall chances in the Lubbock area are listed at 30% Friday, 40% Friday night and Saturday and 30% again Saturday night and Sunday. Daytime high temperatures are expected to range from the mid-80s to high 70s and nighttime lows from the low 60s to upper 60s.
On the demand front, a slight to moderate slowing of U.S. export sales is expected to be reported by USDA at 7:30 a.m. CDT on Friday for the week ended Aug. 28. The report has been delayed from the usual release on Thursdays by the Labor Day holiday on Monday.
Supply availability has tightened ahead of volume movement of new-crop cotton. This is reflected in the premiums of October over December and December over March.
U.S. all-cotton exports in July fell 26.3% from a month earlier to 447,097 running bales and were down 35.5% from July 2013, the Commerce Department reported. Exports were 606,537 bales in June, 872,573 bales in May and 693,012 bales in July 2013.
Meanwhile, with the 2014 farm bill having ended support payments for upland cotton, producers across the belt have begun signing up for a cotton transition assistance program. Signup continues through Oct. 7.
A transition payment equivalent to 5.4 cents a pound will be provided on a farmΆs 2013 base cotton acres and direct program payment yield. Producers have been encouraged to enroll soon to minimize payment reductions because of sequestration.
Payments will be reduced by 7.2% on applications approved before Oct. 1 and by 7.3% on those after that. The reductions are required by the Budget Control Act of 2011 under which USDA must lower certain payments in a process known as sequestration.
The transition plan was authorized as part of the 2014 farm law because the Stacked Income Protection Plan, a new insurance product, couldnΆt be made available for the current crop.
Futures open interest eased down six lots Wednesday to 176,847, with DecemberΆs down 316 lots to 110,964 and MarchΆs up 157 lots to 49,864. Cert stocks declined 535 bales to 66,982.
World prices as measured by the Cotlook A Index gained 60 points Thursday morning to 74.95 cents, narrowing the premium to WednesdayΆs December futures settlement by five points to 8.99 cents.
