Cotton Finishes Inside Day Slightly Higher

Support sought for cottonseed policy. Designation as an “other oilseed” would make cottonseed eligible for PLC or ARC programs.

U.S. cotton futures traded inside the prior-day range on thin volume and settled modestly higher in most-active March Tuesday.

March closed up 34 points to 61.94 cents, finishing in the middle of its 68-point range from up a point at 61.61 cents to up 69 points at 62.29 cents. It posted the session low on the opening overnight.

Maturing December settled up 44 points to 60.60 cents and May edged up 29 points to finish at 62.77 cents.

Volume slowed to an estimated 13,800 lots from 35,227 lots the previous session when spreads accounted for 7,639 lots or 22% and EFP 26 lots. Options volume totaled 925 calls and 1,155 puts.

On the Washington scene, House Agriculture Committee Chairman Michael Conaway, R-Tex., and Ranking Member Collin Peterson, D-Minn., have circulated a letter to their House colleagues across the Cotton Belt seeking support of the cottonseed policy sought by the National cotton Council.

Addressed to Secretary of Agriculture Tom Vilsack, the letter cites severe economic challenges facing producers and other industry segments.

The letter asks the secretary to take all available policy actions to provide assistance to the U.S. cotton industry and calls for USDA to utilize its existing authority in the 2014 farm law to designate cottonseed as an “other oilseed.”

That designation would make cottonseed eligible for the Price Loss Coverage or Agriculture Risk Coverage programs. The House farm leaders said such action is viewed as consistent with the intention of the 2014 farm act.

U.S. and global cotton prices have declined from record highs in 2011 and have been significantly depressed since the summer of 2014, just as the new farm bill was being implemented.

Lower prices for cotton lint and cottonseed contributed to a decline in average market revenue of more than $150 per harvested acre in 2014 from 2013, the leaders said.

And current expectations for prices and yields indicate that market revenue will decline an additional $24 per acre in 2015, resulting in cotton revenues 25% lower than the average returns for 2010 through 2013.

“This revenue decline occurs at a time when production costs remain at elevated levels, with the differential between costs and market revenue the largest it has been in the past 10 years,” the House lawmakers said.

As a result of those dynamics, U.S. cotton plantings fell in 2015 to 8.5 million acres, a 22% decline from 2014 and the lowest since 1983 when only 7.926 million acres were planted under a payment-in-kind program.

Prolonged production declines of that scale will result in severe strain on the entire cotton infrastructure, which continues to be the backbone of many small, rural communities in the 17 cotton producing states, the letter says.

The Cotton Council also is continuing discussions with USDA and Senate Cotton Belt offices.

U.S. futures open interest fell 1,521 lots Monday to 171,750, with DecemberΆs down 392 lots to 294 and MarchΆs down 2,293 lots to 129,547. Cert stocks grew 715 bales to 59,664. Awaiting review were 3,263 bales.

World cotton futures closed up 55 points to 70.80 cents in the May contract, widening the premium over U.S. May futures by 26 points to 8.03 cents.