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Weekly Cotton Comments                 01/14 10:37

   Cotton Hits New Contract High, Gains 1.85%

   Export sales hit 12-week high; shipments rose to five-week high but still 
lag. U.S. ending stocks fell to 3.2 million bales as crop cut, largely on Texas 
yields. Global balance-sheet changes relatively small. Upland classing reached 
13.378 million RB, 80% of the crop estimate. Hedge funds and specs raised their 
net longs to a six-week high. Mills bought 1,828 lots on-call. Sorghum crop 
insurance price election boosted.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures climbed to a new contract high after USDA cut U.S. production 
and lowered ending stocks in its monthly supply-demand estimates enroute to 
finishing up 2.12 cents or 1.85% to 116.84 cents in spot March for the 
marketing week ended Thursday.

   March settled just below the midpoint (116.90 cents) of the week's 4.19-cent 
range from 114.80 cents last Friday to a new contract high of 118.99 cents on 
Wednesday, eclipsing its prior high of 118.50 cents on Nov. 17 and also closing 
on a new contract high finish at 117.64 cents.  Technically, a close above 
118.50 cents still is seen as required to pave the way for a test of the 
December calendar-year high of 121.67 cents set Nov. 2.   

   The inverted March-May spread narrowed a slight seven points to settle at 
237, while the May-July inversion tightened 54 points to close at 233. The 
inverted intercrop July-December straddle widened 104 points to 16.46 cents. 
December posted five new contract highs in a row and four consecutive new high 
closes before reversing to a session loss of 66 points on a close Thursday at 
95.68 cents.

   Cash online sales quickened to a marketing year high of 103,138 bales from 
97,917 bales the previous week. Prices eased off 13 points to an average of 
109.49 cents, reflecting a 26-point gain to 56.89 cents in average premiums 
over loan values. Grower-to-business sales increased to 82,118 bales and 
business-to-business sales dipped to 21,020 bales.

   On the competitive front, the average of the five lowest-priced world 
growths for the Far East gained 173 points to 126.76 cents, while the 
lowest-priced U.S. growth landed there gained 107 points to 130.20 cents. The 
U.S. premium thus narrowed 66 points to 3.44 cents. The adjusted world price 
rose to 105.58 cents.

   World values as measured by the Cotlook A Index had advanced 105 points to 
129.55 cents for the week coming into Thursday, widening the international 
basis by 142 points to 13.53 cents over the prior-day March futures settlement.

   International prices resumed their upward trajectory during December, 
marking the sixth month out of the last seven during which asking prices 
advanced, Cotlook noted in a review. The A Index registered its low for the 
period on Dec. 3 at 116 cents and ended the month at 127.20 cents.

   In 2021, the index began at its lowest for the calendar year at 84.75 cents 
and crossed the dollar mark -- a rare occurrence -- in late July.  The index 
registered a high of 128.45 in mid-November. The average for the 12 months was 
historically high at 101.39 cents, up from 71.98 in 2020.

   On the demand scene, net all-cotton export sales jumped to 441,700 running 
bales for this season and next for the week ended Jan. 6, largest combined 
sales in 12 weeks and up from 412,600 RB a year ago. Sales for 2021-22 surged 
to 403,400 RB and new-crop sales dipped to 38,300 RB, up 41,500 RB and down 
12,400 RB from last year, respectively.

   Upland net sales for 2021-22 of 401,000, up 85% from the four-week average 
and the largest since Sept. 23, went to 18 countries, headed by China (139,500 
RB), India (74,700 RB) and Turkey (53,200 RB). The upland sales were the third 
largest of the marketing year. New-crop sales were primarily for Pakistan 
(36,500 RB).

   All-cotton 2021-22 commitments (outstanding sales of 8.015 million RB plus 
shipments) reached 11.373 million RB, still down 1.087 million RB or 9% from 
last season. Commitments were 78% of the January export estimate, about the 
same as the percentage of final exports a year ago. New-crop commitments of 
1.158 million RB were up 310,000 RB from year-ago bookings.

   Upland and Pima shipments combined rose to a five-week high to 176,900 RB, 
up from 112,100 RB the week before but down from 284,900 RB a year ago. Upland 
shipments of 167,600 RB, up 60% from the previous week and 27% from the 
four-week average, went to 20 countries, led by China (59,000 RB), Vietnam 
(26,900 RB) and Turkey (19,400 RB).

   All-cotton shipments for the season of 3.358 million RB were down 2.792 
million RB or 45% from a year ago and were about 23% of the January export 
estimate, compared with 39% of final exports at this stage last season. To 
reach the January estimate, exports need to average roughly 385,900 RB per 
week, while sales averaging around 109,500 RB would match the shipments 
forecast.

   Earlier, with a 660,000-bale reduction in U.S. all-cotton production to 
17.62 million and a slight 50,000-bale hike to 2.55 million in domestic mill 
use more than offsetting a 500,000-bale cut to 15 million in exports, ending 
stocks fell 200,000 bales to 3.2 million in USDA's monthly supply-demand report.

   The production cut came largely on a 400,000-bale reduction to 7.6 million 
in the upland crop in Texas where the projected yield fell to 695 pounds per 
harvested acre, down 36 pounds from the December estimate and 25 pounds below 
the five-year average.

   The increase in U.S. mill use reflected faster than expected gains through 
November, USDA said, and the reduction in exports was attributed to logistical 
issues in the United States and elsewhere along with a decline in projected 
world trade. Ending stocks are projected at 18.2% of total market offtake, down 
from 18.9% foreseen in December but up from 16.8% in 2020-21. The projected 
season-average upland farm price is unchanged at 90 cents.

   Relatively small global balance sheet changes featured a 608,000-bale 
reduction to 120.96 million in production and virtually unchanged consumption 
at 124.24 million bales, down 30,000 bales. Global stocks fell 726,000 bales to 
85.01 million, 3.4 million below 2020-21. World cotton trade is seen down 
385,000 bales from last month at 46.56 million.

   On the U.S. crop scene, classing of upland cotton rose to 729,457 RB for the 
week ended Jan. 6 to bring the 2021-22 total to 13.378 million RB, up 6% from 
12.627 million RB graded a year ago and 79.9% of the new crop estimate. Last 
year, 93% of the final upland production had been classed.

   Tenderable cotton accounted for 79% for the week, down from 82.4% the prior 
week, and 84.4% for the season, up from 76.3% a year ago. Classing of 11,548 RB 
of Pima brought the extra-long staple count for the season to 280,494 RB, down 
from 372,443 graded last year.

   Classing of 322,970 RB in Texas raised the state season total to 5.716 
million RB, up 26% from 4.535 million RB graded a year ago, 77% of the January 
estimate and 43% of the U.S. upland cotton classed thus far.

   The two Texas High Plains classing facilities have graded a combined 3.474 
million RB, including 1.091 million RB at Lamesa and 2.384 million RB at 
Lubbock. An estimated 68.2% of the classing run for the season has been classed 
at Lamesa along with 68% of the projected total at Lubbock. Some cotton grown 
in eastern New Mexico comes into the High Plains for classing and some grown in 
fringe High Plains areas goes to Abilene.

   On the money-flow front, hedge funds and speculators slightly increased 
their buying in cotton futures and options combined during the week ended Jan. 
4, adding 4,920 lots to raise their net longs to 88,861, according to the 
Commodity Futures Trading Commission.

   Those were their largest combined net longs in six weeks. Hedge funds bought 
a net 4,879 lots, adding 7,635 longs and 4,999 shorts to raise their net longs 
to 77,234, while specs net bought a mere 41 lots on the addition of 958 longs 
and 917 shorts to nudge theirs up to 11,627. Index funds bought 1,909 lots, 
raising their net longs to 78,983.

   Commercials sold a net 6,828 lots, adding 9,154 shorts and 2,326 longs to 
boost their net shorts to 167,843, which reflected a 1.3 percentage point 
decline to 57.4% of a jump in the combined open interest.

   Prices during the reporting week traded within a 768-point range in spot 
March from 110.00 to 117.68 cents, which became a new overhead resistance area 
that was taken out Wednesday. Combined open interest jumped 17,720 lots to a 
delta-adjusted 292,287.

   Meanwhile, mills bought a net total of 1,828 lots on--call last week to 
raise their unpriced sales to 145,278, CFTC call data showed after the close 
Thursday. Producers added 297 lots to raise their unfixed position to 38,691. 
The net call difference rose to 106,587 lots, 43.3% of the rising futures open 
interest.

   In 2021-crop deliveries, unpriced mill sales rose by 725 lots to 122,822, 
60.1% of the OI, and the unfixed producer position by 248 lots to 17,777.  The 
net difference of 104,511 lots was 51.4% of the OI. By comparison, unfixed mill 
sales a year ago stood at 82,620 lots and the net call difference was 64,067 
lots, 40% and 30% of the OI, respectively.

   In a related competitive-crop development, the USDA's Risk Management Agency 
has set the sorghum price election for reinsurance at 99.6% of the price of 
corn, up from 96% for 2021. This means farmers could insure grain sorghum at a 
price almost identical to that of corn.

   Producers will have the largest amount of price protection relative to corn 
in history under the federal crop insurance program, says CEO Tim of the 
Lubbock-based National Sorghum Association.

   The sorghum price election formula is based on a 10-year rolling average of 
sorghum bids at elevators across the nation. The NSP worked closely with RMA 
after a 2008 farm bill directive to change the formula to be more reflective of 
sorghum price.

   Sorghum's drought tolerant characteristics have made it an important acreage 
competitor on the semi-arid Texas High and Rolling Plains.




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