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Weekly Cotton Comments                 09/23 05:03

   Cotton Loses 6.5% as Demand Worries Intensify 

   Additional large interest rate hikes loom. Export sales for this season and 
next fell to 46,000 RB. Boll opening rose to 59%, eight points above the 
five-year average; 11% harvested. Funds continued liquidating longs as prices 
rallied before plunging. Unpriced mill on-call December sales fell 918 lots.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures began the marketing week last Friday with limit and 
near-limit closing losses, reinforcing the downtrend from the August highs, and 
ended Thursday down 675 points or 6.53% to 96.54 cents for the period in 
benchmark December.

   December made a strong outside-range reversal on Wednesday, reversing off 
its lowest intraday print since Aug. 2 and closing above the prior-day high. 
Then it closed with a fractional loss on Thursday, even with Tuesday's high. It 
ended in the lower half of the week's broad 1,091-point range from 103.29 cents 
last Friday to 92.38 cents on Tuesday.

   The inverted December-March spread narrowed 27 points to close at 287, while 
the intercrop July-December straddle lost 373 points to settle at 825. December 
2023 shed 233 points to close at 80.53 cents, trading from a low of 78.10 cents 
on Tuesday to a high of 80.73 cents on Thursday.

   Global demand worries -- exports are expected to account for 85% of the 
market offtake of U.S. cotton -- intensified even as some crop concerns mounted 
on the effects of excessive rains in the Southeast and Delta and on late fruit 
shed in the drought-stricken Texas High Plains.

   The Federal Reserve approved its third consecutive interest-rate rise of 
0.75 percentage point and signaled additional large increases were likely even 
though they are raising the risk of recession, The Wall Street Journal 
reported. The move, though expected, and comments were seen as indicating that 
rates will stay higher for longer to stamp out inflation.

   Cotton traders are keeping an eye on a tropical disturbance expected to move 
into the Southern Caribbean by Monday and given a 90% chance of developing into 
a tropical storm. The question is whether the disturbance, known as Tropical 
Wave Invest 98-L, can develop into a hurricane, get into the Gulf of Mexico and 
pose a threat to open cotton.

   Volume increased to an estimated average of 33,477 lots per session from 
20,681 lots. Open interest rose by 4,523 lots to 214,256, with December down 
460 lots to 108,727, March up 3,226 lots to 49,756, May up 746 lots to 19,454, 
July up 29 lots to 12,914 and December 2023 up 920 lots to 20,914. Cert stocks 
declined to a mere 769 bales from 4,552.

   Cash online sales slowed to 1,935 bales from 4,834 on The Seam. Prices fell 
750 points on an average 102.21 cents, reflecting a 637-point drop to 47.89 
cents in premiums over loan values. Grower-to-business sales were 462 bales and 
business-to-business sales were 1,493 bales.

   On the competitive scene, the average of the five lowest-priced world 
growths for the Far East fell 629 points to 113.80 cents, while the 
lowest-priced U.S. growth landed there fell 684 points to 113.81 cents. The 
U.S. premium thus virtually vanished, falling 55 points to a single tick. The 
adjusted world price fell to 88.88 cents.

   Coming into Thursday, the Cotlook A Index of world values had lost 265 
points from a week earlier to stand at 111.95 cents, widening the international 
basis by nine points to 18.62 cents over the prior-day December futures close.

   On the demand scene, net U.S. all-cotton export sales for this season and 
came in at an anemic 46,000 running bales during the week ended Sept. 15, down 
from 126,800 RB the prior week and 368,900 RB a year ago.

   Current-crop sales were 32,700 RB -- cancellations were 12,600 RB, including 
8,800 RB by China -- and new-crop sales were 13,300 RB, compared with 368,900 
RB and zero, respectively, last year, USDA data showed.

   All-cotton 2022-23 commitments -- outstanding sales of 6.441 million RB plus 
shipments -- inched up to 8.092 million RB, narrowing the lead over cumulative 
sales a year ago to 1.241 million bales or 18%. Outstanding sales are up from 
5.456 million RB last year.

   Combined shipments of upland and Pima or extra-long staple cotton rose to 
232,700 RB from 142,300 RB the previous week and 180,600 RB last year. This 
brought exports for the season to 1.651 million RB, up from 1.395 million RB a 
year ago. Exports were 12% of the 2022-23 forecast, compared with 9% of the 
current 2021-23 estimate at the corresponding point last season.

   To achieve the USDA export projection, all-cotton shipments need to average 
approximately 234,900 RB per week over the 45 weeks remaining in the marketing 
year. Weekly all-cotton sales averaging roughly 91,800 RB would match the 
export projection.   

   On the U.S. crop scene, boll opening increased 10 percentage points to 59% 
during the week ended Sunday, up from 46% last year and the five-year average 
of 51%, USDA reported. Harvesting edged up three points to 11% completed, up 
from 8% last year and even with the average.

   Conditions were little changed, with good-excellent holding at 33%, fair 
dipping two points to 28% and poor-very poor increasing two points to 39%. Last 
year, G/E was 64%, fair 28% and P/VP 8%.

   Boll opening in Texas stood at 55%, up from 50% a week ago, 41% last year 
and 43% on average. Twenty percent of the crop was off the stalk, up from 17% 
the prior week and 18% last year and on average.

   A relative bright spot in an otherwise dismal Texas crop situation is in the 
Rio Grande Valley where estimates put the output at 300,000 bales. Most valley 
gins are expected to operate into mid-October.

   Pop-up afternoon thunderstorms delayed final harvesting in the Upper Coast 
early in the period and were expected throughout the Texas coast later in the 
week and into the weekend. Yields in the Coastal Bend averaged around 1.25 to 
1.5 bales per acre. Several gins there have completed their season. The 
Blacklands harvest neared 55% completed.

   Classing of 112,645 bales for the week ended Sept. 15 brought the total at 
Corpus Christi to 679,433, up from 396,310 bales a year ago. Tenderable cotton 
accounted for 87.9% for the season, compared with 88.6% last year. By Sept. 20, 
the total had risen 108,005 bales to 787,438.

   Some irrigated cotton on the Texas High Plains has kicked off a surprising 
portion of its fruit that would have been expected to stick and mature after 
recent rains.

   Crop insurance adjusters continued evaluating both irrigated fields and the 
small area of dryland cotton left after the devastating growing season drought. 
Additional abandonment is expected, including failures of irrigated acreage.

   Elsewhere, irrigated acreage in Kansas is estimated to produce around 400 to 
500 pounds less than average. Gins expected to operate one shift. Estimates put 
the Oklahoma crop around a third of last season's output.

   Wet conditions delayed fieldwork in the lower Southeast. Boll setting had 
been completed in many fields. Boll rot, hard-locked bolls and seeds sprouting 
in bolls were reported in southern Georgia where heavy rains had fallen in 
recent weeks. Georgia's crop was 60% open, up eight points from last year but 
three points below average. Defoliants were expected to be applied to some 
early cotton this week.

   Favorable conditions prevailed in the North Delta. Boll opening advanced 
steadily and defoliation gained momentum in early-planted fields. Some boll rot 
and hard lock were reported in fields which had received the heaviest recent 
rains. Boll opening jumped 24 points in Arkansas to 81%, up from 74% last year.

   Fields that were inundated in Louisiana and Mississippi in August and early 
September also showed boll rot and seeds sprouting in the boll. Lint and seed 
deterioration had been observed but the extent hadn't been determined. Boll 
opening reached 72% in Mississippi, up from 69% on average, and 91% in 
Louisiana. Some early Louisiana yields of 1,050 pounds were reported. Rayville 
had classed 7,371 bales as of Sept. 20.

   In the Desert Southwest, Tropical Storm Kay brought strong winds and brief 
heavy downpours to western and central Arizona. Harvesting neared completion 
around Yuma. The first samples arrived at the Visalia classing office and 
results were typical for the area. Nearly a third of the crop in New Mexico and 
El Paso had open bolls.

   In the San Joaquin Valley, some rain from remnants of Tropical Storm Kay 
fell in Kern County but it didn't stop defoliation activities. The crop was at 
the cutout stage.     

   On the money-flow front, funds and small specs continued to liquidate longs 
as prices rallied in cotton futures-options combined during the latest 
reporting week, according to the Commodity Futures Trading Commission's latest 
traders-commitments data. Prices subsequently plunged and made an outside-range 
calendar week down.

   Hedge funds sold a net 2,813 lots during the week ended Sept. 13, 
liquidating 2,866 longs and covering 53 shorts to cut their net longs to 16,572 
lots. Index funds in light activity sold a net 299 lots to shave their net 
longs to 69,178, while non-reportable traders sold 547 lots to trim theirs to 

   Commercials bought 3,658 lots, adding 1,857 longs and covering 1,801 shorts 
to lower their net shorts to 97,222. They were net short 31.9% of the open 
interest, down 1.2 percentage points.

   Prices spanned a reporting 691-point range in the December delivery, rising 
from 101.19 cents, lowest at the time since Aug. 11, to 108.10 cents, highest 
since Sept. 2. Open interest dipped 421 lots to 290,812.

   Meanwhile, unpriced mill on-call sales based in December declined 918 lots 
to 52,811 last week, CFTC data showed after the close Thursday. That was an 
unchanged 48.2% of the declining futures OI. Unfixed producer purchases fell 
408 lots to 18,685.

   This trimmed the net call difference 510 lots to 34,126, an also unchanged 
31.1% of the OI. The unpriced mil sales outweighed the unfixed producer 
purchases by an also flat ratio of 2.8:1, not counting any options offsets. The 
December-July ratio is 4:1.

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