Pricing formula for looming Chinese sales seen as leaving room for higher “outside” prices. Mostly only skimpy weekend rain reported in the Texas High Plains. Jump in weekly AWP sharpened interest in loan data.
Cotton futures closed sharply higher across the board on huge volume Monday, led by most-active July on its highest finish since Feb. 3.
July settled up 221 points to 62.23 cents, near the high of its broad 280-point range from down 37 points at 59.65 to up 243 points at 62.45 cents. It set the range for the session in overnight dealings.
Maturing May closed up 212 points to 62.15 cents and December finished up 179 points to 61 cents. December closed up 481 points or 8.6% from its Feb. 29 low and at its highest finish since Feb. 8.
Volume jumped to an estimated 71,666 lots from 55,789 lots the previous session when spreads accounted for 29,587 lots or 53%, EFS 326 lots and EFP 157 lots. Options volume totaled 7,400 calls and 7,286 puts.
Confirmation that China plans to buy additional high quality cotton while also selling some 2 million metric tons or 9.19 million 480-pound bales from its huge strategic stockpile was viewed as supportive.
Details of the resumption of sales — scheduled to begin May 3 and continue through Aug. 31 — indicated the auction prices would be well above recent international values, according to various sources.
The auction prices are to be determined, as previously rumored, on weekly calculations involving domestic and international values. The methodology apparently would leave room for higher “outside” prices, analysts said.
Plans to buy an undetermined amount of higher qualities for the reserves were viewed as possibly offering export opportunities for U.S. cotton. Availability of uncommitted higher qualities from the 2015 crop in the worldΆs largest cotton exporter is considered tight, however.
On the weather scene, mostly only skimpy rain fell over the weekend in the main cotton areas of the Texas High Plains, though some heavy amounts were recorded in the Rolling Plains.
Lubbock got a mere 0.01-inch and has registered 0.58 of an inch for the month, below the normal of 0.72 and 0.63 last year. Precipitation since Jan. 1 has totaled 1.17 inches, compared with 3.22 inches for the long-term average and 3.20 inches last year.
A slight chance for showers and thunderstorms was forecast for Monday afternoon and night, increasing to a 40% chance Tuesday and lingering at 20% Wednesday.
Meanwhile, a surprise jump to 49.45 cents in the adjusted world price USDA announced for the week ending Thursday in conjunction with a 202-point decrease in the transportation cost differential has sharpened interest in coming data on cotton under loan.
The AWP jump could be viewed as raising floor prices for U.S. cotton, some traders said, and resulted in a corresponding reduction to 2.55 cents in this weekΆs marketing loan gain.
U.S. upland loans outstanding declined 382,692 running bales during the week ended last Monday to 2.607 million RB, according to USDA figures released on Friday. Repayments were made on 387,511 RB and entries totaled 4,819 RB.
Upland cotton under loan included 225,991 RB of Form A issued to individual growers and 2,381,394 RB of Form G issued to marketing cooperatives or loan servicing agents.
Futures open interest fell 10,847 lots Friday to 195,174, with MayΆs down 16,731 lots to 21,599 and JulyΆs up 6,132 lots to 107,670. Exercised in May were 11,139 calls and 6,821 puts. First notice day for May is next Monday. Cert stocks increased 2,197 bales to 41,733.
