FUTURES PRICES FALL TO MULTI-WEEK LOWS

• Traders Liquidate December Positions
• Spot Prices Weaker
• Export Sales Volume Healthy
• Trade Deal Less Certain

Cotton futures attempted to rally last Friday but were not able to gather any momentum this week. Prices steadily fell to multi-week lows with December futures leading the way down as traders exited the lead contract. December fell to 61.84 cents per pound at Thursday’s close, down 2.43 cents for the week. March futures fell 2.07 cents to 64.01. Trading volumes were still fairly heavy, and it was clear that many traders were liquidating. Open interest fell by 11 percent (25,536 contracts) to 206,230, the lowest level since late August.

Friday, November 22 is First Notice Day for the December contract, and anyone not wishing to make or take delivery of cotton in December should have closed their position. Traders’ activity will price off of March for the next two months.

SPOT MARKET ACTIVITY

As of late Thursday afternoon, The Seam’s G2B platform traded more than 23,000 bales for the week. The average price received by producers was 57.84 cents per pound, down 1.51 cents from the previous week’s average. The average premium over the CCC loan was 6.00 cents per pound, 93 points lower than the previous week. Bales offered for sale by growers stood at 167,000.

CROP PROGRESS

Harvesting across the U.S. remains slightly ahead of pace at 68 percent versus the 5-year average of 66 percent as reported by NASS as of November 17. Texas, Oklahoma, and Kansas all remain ahead of their 5-year averages as well, and industry estimates for West Texas hover around 70 to 75 percent off the stalk.

COTTON CLASSINGS

 Upland and Pima classings for the U.S. crossed the 10 million bale mark for the season this week, approaching the halfway point for the projected U.S. crop of 20.8 million bales. The Corpus Christi Classing Office for the season has averaged over a 54.00-cent loan value, according to USDA. Lubbock, Abilene and Lamesa classing offices have good qualities with predominant color 21, leaf 2, and base micronaire. Staple length averages are mixed across the Southwest, but daily classings are improving.

EXPORT SALES AND SHIPMENTS

The past two weeks of export sales have shown a healthy volume of new sales commitments. Last week saw net new sales of 345,100 Upland bales, and there were 227,600 more this week. Shipments have been a bit less exciting, but accumulated exports are still on track to hit USDA’s current target of 16.5 million bales. On the other hand, the first three months of the marketing year usually account for a relatively small proportion of total annual activity. Outstanding sales are still on par with the past two seasons, and there is a lot of cotton left to ship. Traders will be closely watching shipping data over the next few months to see if export performance can still beat expectations as we get into the busy season.

U.S./CHINA TRADE NEGOTIATIONS

It almost goes without saying that U.S.-China trade war headlines had a great deal to do with the gyrations in the market this week. Although cotton prices had moved to recent lows Monday and Tuesday, the market did not fall to new lows until after certain Wednesday headlines that indicated a deal may not happen within the current calendar year. Despite China striking a positive tone overnight on Thursday, buyers were not able to find enough encouraging news to force much of a rebound. The political uncertainty surrounding protests in Hong Kong, the passage of the Hong Kong Human Rights and Democracy Act (despite strongly expressed opposition from China), and the ongoing impeachment inquiry did not help bring much confidence to the cotton market either.

OTHER MARKETS

Other commodity markets were mixed this week. Stock indices made new highs but gave back some of their gains as deal optimism faded. The yields on treasuries fell as investors moved toward “safer” assets despite comments from Federal Reserve officials that implied ambivalence about reducing interest rates any further. The U.S. Dollar also seems to remain well supported versus major competitors’ currencies, which continues to provide some pressure on U.S. export competitiveness.

REPORTS TO WATCH

December is now behind the vast majority of traders. On-call positions have been fixed and positions rolled which will allow many traders to put attention back on the cash markets. The December delivery process likely will receive some attention, but the next news releases of interest will be the Commitments of Traders report Friday at 2:30 Central, and the weekly Export Sales report which will be released Friday after the Thanksgiving holiday.

IN THE WEEK AHEAD:

• Friday at 7:30 a.m. Central – Export Sales Report
• Friday at 2:30 p.m. Central – Cotton-On-Call
• Friday at 2:30 p.m. Central – Commitments of Traders