Source: Agfax.com

By Duane Howell DTN Cotton Correspondent
April 20, 2018
A big on-call imbalance powered old-crop contracts. Overall mill unpriced sales neared all-time high. Less rain than expected earlier in the Texas Plains helped to lift new-crop prices. Premium widened on U.S. cotton in the Far East. Cert stocks declined 5,106 bales. Cotton futures surged to within roughly a cent of contract highs in old-crop deliveries and hit new contract peaks in new-crop months through May 2019 Friday.

Most-active July settled up 191 points to 84.73 cents, just off the high of its 201-point range from 82.80 to 84.83 cents. May led the gains, settling up 250 points to 85.47 cents, near the high of its 263-point range from 83 to 85.63 cents. December gained 84 points to close at 79.43 cents, a new contract high settlement and two ticks below its new contract high. For the week, May gained 206 points, July 138 points and December 52 points.

A big old-crop imbalance reported in on-call positions powered the surge in the May and July deliveries, while forecasts for smaller rainfall amounts than expected earlier in the Texas High Plains helped to lift new-crop prices to new contract highs. Coverage also may be diminished.

Volume quickened to an estimated 48,700 lots from 23,766 lots the prior session when spreads accounted for 11,389 lots or 48% and EFP 309 lots. Options volume increased to 11,149 lots (5,973 calls and 5,176 puts) from 6,152 lots (2,064 calls and 4,088 puts). Mills priced a net 1,327 lots in May and July combined last week, reducing their on-call sales position in the old-crop deliveries to 63,924 lots or 6.392 million bales, according to data reported by the Commodity Futures Trading Commission after the close Thursday.

Producers added a net 534 lots to nudge their unpriced position up to 7,411 lots or 741,100 bales. The net-call difference thus fell 1,861 lots to 56,513, which was 36.3% of the open interest, up from 33.4% a week earlier. The ratio of potential mill buying to producer selling narrowed to 8.63:1 from 9.49:1.

Mills priced or rolled 3,172 lots in the May contract to reduce their outstanding sales there to 12,775 lots (1.278 million bales). There were six trading sessions left at the time until first notice day. The unfixed producer declined 139 lots to 1,956 lots, resulting in the net difference declining 3,033 lots to 10,819.

Across the whole board, mills boosted their unpriced sales by 10,728 lots to 160,293, just shy of the all-time high of 160,636 lots on March 16. Producers hiked their unfixed position 1,539 lots to 45,029. On the competitive pricing front, the average of the five lowest-priced world growths for the Far East dipped 16 points to 91.21 cents for the week ended Thursday, according to USDA calculations, while the lowest-quoted U.S. cotton landed there gained 30 points to 92.10 cents.

The U.S. premium thus widened 46 points to 0.89 of a cent. The adjusted world price for the marketing week ahead, reflecting transportation and quality differentials, is figured at 74.16 cents, leaving the marketing loan gain of course at zero. The fine count adjustment for 2017-crop qualities better than 31-3-35 is 1.06 cents, based on differences in between premiums in U.S. and international markets.

Decertification of 5,106 bales dropped stocks in deliverable position to 66,777 bales. Futures open interest declined 1,134 lots to 258,755 on Thursday, with May’s down 2,893 lots to 7,425, July’s up 126 lots to 123,406 and December’s up 50 lots to 1,481 lots. (Source: Agfax.com)