Weekly Cotton Comments                 03/27 05:29

   Cotton Bounces off 11-Year Low; Still Ends in Red

   Cash online trading stalled. Prospective plantings eyed. Export sales 
declined but remained supportive; shipments stayed on pace to meet the 
estimate. Cotton seedlings emerged in lower Texas valley. Weekly 2019-crop 
upland classing slowed to 27,038 RB. Hedge funds boosted net shorts 8,903 lots. 
China's 2020-21 planted area projected down 5% by CCA.

By Duane Howell
DTN Cotton Correspondent

   Cotton futures closed another marketing week in the red, though prices 
bounced off an 11-year low amid quickened spread trading and rolling by index 
and hedge funds and end-of-month adjustments. 

   Spot May lost 215 points or 3.96% to close at 52.78 cents for the week ended 
Thursday, in the upper third of its 467-point range from 56.35 last Friday to a 
new contract low -- the seventh in a row -- at 50.68 on Monday, lowest since 
June 2009.  It ended with two inside-range sessions. 

   July also shed 215 points to settle at 52.83 cents after spread trading took 
it out to as wide as a 75-point premium over May on Monday.  December dropped 
149 points to close at 54.61 cents. The Cotlook A Index of current-crop world 
values at 63.55 cents Thursday morning prior to the futures close had dropped 
305 points from a week earlier. 

   Technically, May needs to close above last Friday's high to regain upside 
momentum. New-crop December staged an outside-day-range to the upside on 
Tuesday, rallying from a new contract low at 51.90 to settle above Monday's 
high.  The key reversal suggested December may have made a new low, but the 
upside still may appear limited. 

   Volume declined to an average of 44,639 lots from 53,895, ranging from 
65,438 lots on Monday to 24,426 lots on Thursday. Open interest fell 16,212 
lots to 193,189, with May's down 15,503 lots to 79,435, July's down 1,494 lots 
to 48,938 and December's down 1,203 lots to 48,964. Certified stocks declined 
13,134 bales to 28,446, lowest since Feb. 5. 

   Cotton shrugged off a third straight gain in U.S. equities, with the Dow 
Jones industrials jumping 1,351.62 points or 6.38% to 22,552.17 on Thursday, 
amid a focus on an unprecedented $2 trillion stimulus awaiting approval by the 
House and on record weekly jobless claims coming in below the worst fears. It 
was the Dow's biggest three-day surge since 1931. The Senate-passed bill is 
aimed at combatting effects of the coronavirus. 

   Cash online trading drew to a virtual standstill on The Seam, with only 135 
bales changing hands last Friday on the business-to-business exchange.  No 
grower-to-business trading was reported for the week. Spot purchases reported 
by USDA totaled only 298 bales, nudging the season total to slightly over 1.374 
million, compared with 985,842 a year ago. 

   Traders expect USDA's prospective plantings estimate on Tuesday to show 12.7 
million acres, down from 13.74 million last year, according to a Bloomberg 
survey. Guesstimates ranged from 11.7 million to 13.6 million acres. The USDA 
surveyed producers early this month. Since the end of February, new-crop 
December has plunged 740 points. 

   Some trade analysts have expected actual plantings to come in below the USDA 
Outlook Forum analytical projection in February of 12.5 million acres. That 
forecast was about 4% below the National Cotton Council's early survey of 
producer intentions, conducted from mid-December through mid-January, of near 
13 million acres. 

   On the competitive front, the average of the five lowest-priced world 
growths for the Far East fell 496 points to 62.24 cents during the week ended 
Thursday, while the lowest quoted U.S. growth dropped 525 points to average 62 
cents. U.S. cotton thus moved to a 24-point discount from a five-point premium. 

   The adjusted world price fell to 44.99 cents per pound, resulting in a 
marketing loan gain or loan deficiency payment rising to 7.01 cents for the 
program week beginning today, up from 2.05 cents this week. 

   Net all-cotton export sales for this season and next slipped to a 
still-supportive 415,500 running bales for the week ended March 19 from 436,400 
the prior week and a two-crop total of 427,400 during the corresponding week 
last year.

   Sales included 295,400 RB for 2019-20, a four-week low, and 120,100 RB for 
2010-21, compared with 357,900 and 78,500, respectively, the previous week and 
the respective current and forward sales last year of 250,300 and 177,100. 

   Current-crop upland net sales of 277,100 RB, down 19% from the previous week 
and 23% from the four-week average, reflected gross sales of 322,500 RB and 
cancellations of 45,500 RB. Sales went to 17 countries, led by Vietnam, Turkey, 
Pakistan, China and Indonesia. There were concerns about possibly higher 
cancellations in the weeks ahead. 

   All-cotton 2019-20 commitments -- outstanding sales of 7.154 million RB plus 
shipments -- rose to 15.685 million RB, up 2.504 million or 19% from a year 
ago. Sales totaled 98% of the export estimate, compared with 92% of final 
shipments last season. New-crop commitments of 1.930 million RB were some 
647,000 RB below forward sales a year ago. Eleven countries booked new-crop 
upland, mainly Pakistan, China, South Korea and Mexico. 

   Combined upland-Pima shipments of 404,200 RB, up from 385,200 RB the prior 
week and 388,200 RB a year ago, brought exports for the season to 8.531 million 
RB, up 1.44 million RB or 20% from last year. Upland shipments of 386,800 R, up 
5% from the week before but down 3% from the four-week average, went to 23 
countries, headed by Pakistan, Turkey, China, Vietnam and Indonesia. 

   Weekly all-cotton shipments were in line with the average needed to achieve 
the USDA projection, which is up 12% from last season. Competitively priced 
U.S. cotton has continued moving abroad amid a world import demand projected up 
a million bales to 43.53 million in USDA's latest estimate. However, 
uncertainty surrounds the impact of the coronavirus on the world economy, 
particularly the textile industry. 

   Elsewhere on the trade front, the United States has reapplied a 25% tariff 
on imports of most Chinese goods, including cotton and textiles, after a prior 
exemption expired, according to the U.S. Trade Representative. Exemptions were 
extended for another year for 11 categories of products. 

   On the crop scene, cotton planting remained active during the reporting week 
in the Texas Lower Rio Grande Valley where some seedlings had emerged. Cotton 
planting slowed in parts of the Coastal Bend because of inadequate moisture and 
progressed in areas of the Upper Coast. 

   Fields in the Texas High and Rolling Plains are in good conditions after 
recent widespread rains. Record heat this week spawned chatter about whether 
this might be a harbinger of another year of weather extremes.  The thermometer 
hit 92 degrees Thursday at Lubbock, topping the old record of 88 degrees set in 
1956 during a prolonged drought. 

   U.S. classing of 2019-crop upland and extra-long staple cotton combined 
slowed to 31,189 RB from 46,104 the prior week, with the total for the season 
edging up to 19.361 million RB, slightly above USDA's March crop estimate. 
Upland classing of 27,039 RB, down from 35,939, nudged the total to 18.693 
million RB, 78.8% of which met tenderable requirements. 

   By regions, upland classing included (totals may not add because of 
rounding) 5.194 million RB in the Southeast, 5.884 million in the Mid-South, 
7.039 million in the Southwest and 575,260 in the West. Cotton remaining to be 
classed will be graded at Memphis except for that in the Far West which will 
still be done at Visalia, Calif.  

   Meanwhile, trend-following funds sold an additional 8,903 lots in cotton 
futures-options combined during the week ended March 17, adding 5,258 shorts 
and liquidating 3,645 longs to raise their net shorts to 21,000 lots, according 
to the latest traders-commitments data. 

   Index funds sold 4,533 lots to cut their net longs to 65,088, the Commodity 
Futures Trading Commission report showed, while non-reportable traders sold 856 
lots to hike their net shorts to 963. Commercials bought a net 14,293 lots, 
adding 16,736 longs and 2,443 shorts to reduce their net shorts to 43,125 lots. 

   Disaggregated data showed managed-money traders sold a net 4,519 lots, 
liquidating 4,899 longs and covering 380 shorts to increase their net shorts to 
12,465 lots. 

   Prices during the reporting week ranged from 61.94 to 57.86 cents, a new 
contract low at the time. Combined open interest increased 9,916 lots to a 
delta-adjusted 267,040. 

   On the international scene, China's 2020-21cotton plantings are projected at 
3.049 million hectares (one hectare equals 2.471 acres), down 5% from last 
year, by the China Cotton Association. 

   Projections by USDA at its Outlook Forum pointed to a slight reduction in 
planted area in China but little change in production because of a rebound in 
yields in Xinjiang, the leading cotton-producing province. 

   China's 2019-20 production is pegged by the CCA at the equivalent of 27.1 
million 480-pound bales, compared with USDA's latest estimate of 27.25 million. 
China was the world's largest cotton producer from 1982 until 2014 when it was 
first surpassed by India. China regained the top rank briefly in 2018-19, but 
India is projected by USDA again to be the largest producer in 2020-21, as in 
2019-20. 


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