Weekly Cotton Comments                 04/16 05:12

   Cotton Finishes Highest Since March 18

   A 4.7-million-bale jump in global cotton imports seen as a bullish 
supply-demand component. Weekly export sales disappoint amid tightening 
supplies. U.S. crop 8% planted. Hedge funds sold 3,164 lots as spot May fell to 
the second lowest since Feb. 29. Unpriced on-call old-crop mill sales fell 
2,098 lots.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures extended gains for the marketing week ended Thursday, 
overcoming disappointing weekly export sales on the heels of bullishly 
construed monthly supply-demand estimates.

   Spot May gained 361 points or 4.43% to close at 85.02 cents, its highest 
finish since March 18. It settled near the high of the period's expanded 
539-point range from 79.84 on Tuesday to 85.23 cents on Thursday. Its nine-day 
moving average crossed above the 18-day MA, a positive technical signal. May 
options expire Friday and first notice day will arrive five trading sessions 
after that.

   The May-July switch narrowed a single tick to settle at 124 points of carry. 
The inverted old-crop, new-crop July-December straddle widened 164 points to 
close at 318, with July up 360 points for the period to 86.26 cents and 
December up 196 points to 83.08 cents.

   Cotton may have felt some vibes from record highs in the S&P 500 and Dow 
Jones stock market indexes as upbeat earnings reports and a strong rebound in 
March retail sales bolstered hopes of a broader economic rebound. Retail sales 
for March rose 9.8%, topping the expected 6.1%, with apparel sales up 18.3%.

   Volume quickened to an average of 60,110 lots per session from 45,006 lots 
the prior week. Spreads made up to 80.4% of volumes that rose up to 70,250 lots 
Monday as funds continued rolling from May. Open interest fell 7,198 lots to 
223,601, with May's down 45,237 lots to 27,853, July's up 27,643 lots to 
91,263, December's up 7,274 lots to 82,203 and March's up 1,981 lots to 9,958. 
Cert stocks dropped a single bale to 95,536.

   Cash online sales increased to 8,257 bales on The Seam from 6,252 bales. 
Prices gained 835 points to average 74.94 cents, widening the average premium 
over loan rates by 296 points to 26.74 cents. Grower-to-business sales declined 
to 3,019 bales and business-to-business sales increased to 5,238 bales. 
Offerings late Wednesday were 37,975 bales.

   World prices as measured by the Cotlook A Index rose to 91.50 cents, 
reflecting a 730-point premium over the prior-day spot futures close. The index 
average for the season to date is 81.08 cents, up from the 2019-20 average of 
71.33 cents, according to the International Cotton Advisory Committee.

   Net U.S. all-cotton export sales for this season and next fell to 126,400 
running bales from 277,400 RB the prior week but were up from net year-ago 
cancellations of 183,800 RB, USDA's weekly report showed. Many in the trade 
have expected weekly export sales to slow because of tightening supplies, 
confirmed in USDA's April supply-demand report.

   Upland net sales for 2020-21 of 122,300 RB (Pima sales were a crop year low 
of 3,100 RB), down 55% from the prior week and 54% from the four-week average, 
reflected gross sales of 124,900 RB and cancellations of 2,700 RB. Sales went 
to 13 countries, led by Turkey, Pakistan, Vietnam, Bangladesh and Indonesia. 
New-crop sales declined to 22,800 RB from 49,000 RB the prior week and 71,800 
RB a year ago.

   Commitments for this season -- outstanding sales of 5.033 million RB plus 
shipments -- rose to 15.719 million RB, now slightly ahead of a year ago and 
nearly 3% above the April export forecast. Cumulative sales last year were 
about 4% above final 2019-20 exports. Commitments for 2021-22 edged up to 1.616 
million RB, widening the gap behind forward bookings a year ago to 605,000 RB.

   All-cotton shipments slipped to 329,600 RB from 393,300 RB the week before 
and 330,800 a year ago but remained above the pace needed to make the upwardly 
revised export estimate. Upland shipments of 313,200 RB, down 16% from the 
prior week and 8% from the four-week average, went to 20 countries, headed by 
Vietnam, Pakistan, China, Turkey and Bangladesh.

   Shipments of upland-Pima combined climbed to 10.686 million RB, up 880,000 
RB or about 9% from last year. Exports have reached nearly 70% of the new 
export estimate, compared with about 65% of final exports at the corresponding 
point last season. Shipments need to average roughly 287,000 RB to make the 
estimate.

   A bullish component of USDA's April supply-demand report featured a jump of 
4.7 million bales or 11.6% from last season to 45.5 million in 2020-21 global 
cotton imports, highest since the record of 47.6 million bales in 2012-13.

   With the global economy rebounding, rising imports are supportive of higher 
world cotton mill use, projected at 117.8 million bales, up 14.9 million bales 
or 14.5% from last season when the Covid-19 pandemic dramatically impacted 
cotton consumption.

   The surging pent-up demand set the stage for USDA to raise its forecast of 
U.S. exports to 15.75 million bales, up 1.5% from both last month's projection 
and last season's final shipments.

   Despite slightly higher exports this season, the U.S. share of world trade 
is estimated below a year ago as stronger competition from other exporters is 
expected to reduce the U.S. share about three percentage points to 34.6%. The 
U.S. mill use estimate remains at 2.3 million bales, up from 2.15 million in 
2019-20.

   China is expected to account for much of import and mill use growth. Its 
imports are forecast at 11.75 million bales, up 750,000 bales from last month 
and 4.6 million bales from last season, and its mill use at 39.75 million 
bales, up 250,000 and nearly 6.8 million bales (20.5%), respectively. Mill use 
is estimated at the highest in three years.

   World production is forecast at 113 million bales, down slightly from last 
month and the smallest in four years on lower harvested area. As mostly 
expected, U.S. production remained at 14.7 million bales. The United States, 
Brazil and India, all major producers, are expected to account for more than 
70% of the total world cotton trade. India is tied with China as the world's 
largest producer at 29 million bales.

   Global stocks are expected to decline nearly 5 million bales or 5% from the 
previous year to 93.5 million. China's stocks, which have been rising slightly 
over the past several years, are projected 37.8 million bales, about 40% of the 
global total, compared with 63% as recently as 2015-16.

    

   U.S. stocks are now forecast at 3.9 million bales, 46% below a year earlier 
and the lowest since 2016-17 when the carryout was 2.75 million bales. The 
stocks-to-use ratio is projected at 22%, down 19 percentage points from last 
season.

   Meanwhile, U.S. cotton planting edged up two points to 8% completed during 
the week ended Sunday, USDA reported, down from 9% a year ago but up from the 
five-year average of 7%.

   Growers had planted 13% of the crop in Texas, two points behind last year 
but two points above the average, and 2% in Georgia, compared with 1% a year 
ago and the average. Planting was 34% completed in Arizona and 10% done in 
California, up a point and two points, respectively, from the state averages.

   Producers began irrigating recently planted cotton in the Lower Rio Grande 
Valley of Texas. Windy conditions persisted as severe to extreme drought 
maintained a grip on the source of the nation's first new-crop cotton supply.

   Drizzles and light rain failed to dent drought on the High Plains this week. 
Chances for showers and thunderstorms in the Lubbock area were rated at 50% for 
Thursday night but rainfall amounts were expected to remain mostly light. The 
week ahead is expected to be mostly dry except for slight chances for showers 
Monday and again Thursday.

   On the money-flow front, trend-following funds sold 3,164 lots, adding 2,294 
shorts and liquidating 870 longs to reduce their net longs to 53,932 lots in 
cotton futures-options combined during the holiday-marked reporting week ended 
April 6, according to the latest Commodity Futures Trading Commission's 
traders-commitments data.

   Index funds sold 1,375 lots to cut their net longs to 73,601 lots, while 
small speculators bought a net 1,212 lots -- mostly covering shorts -- to 
reduce their net longs to 8,776 lots.

   Commercials bought a net 3,428 lots, covering 5,066 shorts and liquidating 
1,638 longs to lower their net shorts to 135,310 lots. They were net short 
46.2% of the open interest, down from 48.1%.

   Prices during the reporting week ranged from 81.52 to 77.65 cents, basis 
spot May. The low was the second-lowest beyond the March 26 low of 77.12 since 
Dec. 29. Buying kicked in at that April 1 low and raised prices by the end of 
the April 9 calendar week to a weekly gain of 445 points to 82.40 cents, 
snapping a string of six consecutive weekly losses. Combined open interest 
during the CFTC trader-reporting week rose by 4,187 lots to a delta-adjusted 
294,957.

   Unpriced on-call mill old-crop sales declined 2,098 lots to 36,330 during 
the week ended April 9, CFTC data released after the close Thursday showed. 
Mills had 27.4% of the May-July open interest, fractionally below 27.8% a week 
earlier. The unfixed producer position fell 2,076 lots to 6,194, resulting in 
the net call difference dipping a mere 22 lots to 30,136, which was 22.7% of 
the OI, up down from 21.8%. The unpriced mill sales outweighed the unfixed 
producer position by a ratio of 5.86:1. 




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