By Duane Howell
For the Avalanche-Journal
U.S. cotton futures, spanning a broadened 221-point range, skidded to a seven-week low, rallied to a five-week high and finished an abbreviated trading period modestly ahead last week.
Most-active March gained 34 points for the week ended Wednesday to close at 63.28 cents ahead of the Thanksgiving holiday. It hit the low of 61.45 cents on Monday, lowest since Oct. 9, and the high of 63.66 cents on Wednesday, highest since Oct. 22.
March finished back above its nine-day, 18-day and 50-day moving averages, all of which tilted upward.
Maturing December, which drew a three-day total of 189 delivery notices, gained 46 points to close at 61.98 cents. It rallied from a low of 59.72 cents, within two ticks of its contract low set on Sept. 24.
Seasonal lows or interim lows have coincided at times in recent years with the December notice period, linked with an easing of harvest pressure as cotton moves from producers to merchants, analysts have pointed out.
Cash grower sales slipped to 31,713 bales from the full program week turnover of 63,514 bales on The Seam. Prices averaged 58.31 cents, little changed from 58.33 cents, reflecting premiums over loan repayment rates of 10.54 cents, down from 10.84 cents. Daily average prices ranged from 56.25 to 60.33 cents.
On the policy scene, House Agriculture Committee Chairman Michael Conaway of Midland 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 of 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 policy actions available 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.”
This 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 letter said.
And current price-yield expectations indicate that market revenue will decline an additional $24 per acre in 2015, resulting in cotton revenues 25 percent 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. 2015 cotton acres are 8.5 million, a 22 percent decline from 2014 and the lowest since 1983 when only 7.9 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.
On the crop scene, U.S. harvesting advanced six percentage points to 70 percent complete during the week ended Nov. 22, down from 76 percent a year ago and 82 percent for the five-year average, USDA said.
The harvest stood at 60 percent in Texas and 64 percent in Georgia, behind the five-year averages of 75 percent and 80 percent, respectively. Harvesting was completed in Arkansas and Louisiana and was 90 percent and more done in California, Mississippi, Missouri and Tennessee.
Fifty-eight percent of the South Carolina crop was harvested, lagging progress a year ago by 36 points and the five-year average by 26 points.
U.S. upland cotton classing of 998,489 running bales during the week ended Nov. 19, up from 966,530 bales the prior week, boosted the seasonΆs total to 5.863 million bales, down 24 percent from 7.713 million bales graded a year ago.
Cotton tenderable on U.S. futures contracts dropped to 55.4 percent for the week and 57.6 percent for the season. A year ago, 73.0 percent graded for the season met tenderable requirements.
Classing of 57,600 bales of Pima brought the extra-long staple total for the season to 195,737, against the year-ago count of 251,815.
In international news, ChinaΆs cotton imports totaled 41,982 metric tons (192,820 480-pound bales) in October, down 49 percent from a year earlier, according to government data.
Imports from January through October fell 42 percent from the 10-month period last year to 1.2 million tons (5.51 million bales).
The USDAΆs supply-demand report earlier this month projected ChinaΆs imports for the 2015-16 marketing year that began Aug. 1 at 5.75 million bales, down 31 percent from 2014-15. This decline was moderated by increases foreseen for Bangladesh, Vietnam and Turkey.
Meanwhile, trend-following funds boosted their net longs by 1,633 lots to 28,884 in U.S. cotton futures-options combined during the week ended Nov. 17, according to the latest supplemental traders-commitments data reported by the Commodity Futures Trading Commission.
Index funds reduced their net longs by 1,284 lots to 64,030, while traders with nonreportable positions upped theirs by 799 lots to 1,778. Commercials increased their net shorts by 1,148 lots to 94,692, liquidating 12,950 longs and covering 11,802 shorts.
In futures only, noncommercials hiked their net longs by 2.2 percentage points to 24.6 percent of the declining open interest. They bought a net of only 364 lots, adding 436 longs along with 72 shorts.
DUANE HOWELL is retired farm editor of the Avalanche-Journal. His email address is duane.howell@sbcglobal.net.
