DTN Cotton Close: Stages Outside-Range Reversal Down

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    U.S. upland classing of 402,595 RB last week boosted the season’s total to 14.975 million RB, 94% of estimated production. Early planting expected in South Texas. Marketing strategies eyed.

    Cotton futures staged an outside-range reversal down Monday, falling from a new four-week intraday high to finish just off the day’s low and below the previous-session low.

    Spot March lost 71 points to settle at 74.14 cents, trading within a 126-point range from up 47 points at 75.32 to down 79 points at 74.06 cents. Broad weakness in commodities and sharp losses in U.S. equities may have contributed to pushing March cotton to a three-session low close.

    May dropped 57 points to close at 74.82 cents, July lost 46 points to settle at 75.44 cents and December slipped 20 points to 71.59 cents.

    Volume increased to an estimated 30,240 lots from 24,109 lots the previous session when spreads accounted for 13,499 lots or 56% and EFP 51 lots. Options volume totaled 5,544 calls and 2,803 puts.

    U.S. upland cotton classing slowed to 402,595 running bales during the week ended Thursday from 507,851 RB the previous week, according to the latest USDA weekly figures posted Friday.

    This brought the total for the season to 14.975 million RB, 94% of the USDA upland crop forecast and from 11.695 million RB graded through Jan. 28 last year when 97% of the final output had been classed.

    Cotton tenderable on futures contracts accounted for 70.7% for the season, up from 55.6% at the corresponding point last season and 68.7% two years ago.

    Classing of 237,500 RB at the two Texas High Plains offices of 176,663 RB at Lubbock and 60,837 RB at Lamesa boosted the area total for the season to 4.963 million RB, up 25% from 3.981 million RB a year ago.

    The Abilene, Texas, facility classed 93,603 RB from the West Texas Plains, Oklahoma and Kansas to hike the overall season’s total there to a rounded 1.15 million RB, compared with 917,989 RB last year.

    Pima classing slowed to 13,272 RB from 16,640 RB, raising the 2016-17 extra-long staple total to 415,867 RB, up from 231,346 RB a year ago.

    Module transporting remained active in the West Texas Plains as intermittent, light rainfall fell early in the reporting period, USDA reported in a weekly review. Sunny, windy conditions prevailed.

    Elsewhere, hot, windy conditions prevailed in southern Texas and the Rio Grande Valley where daytime high temperatures reached the low 90s and soil temperatures rose. Seedbeds were prepared and fertilizers and herbicides applied. Planting was expected to begin early because of the warm conditions.

    Looking at marketing strategies, John Robinson, Texas AgriLife Extension Service cotton economist, noted in a weekly report that the old-crop, new-crop July spread settled Friday at an inverted 4.11 cents. This was up from 3.06 cents the prior Friday.

    A 70-cent call option on July 2017 settled Friday at 7.32 cents, while a 76-cent call was worth 3.89 cents. From a new-crop perspective, a 70-cent put option on December 2017 settled at 3.49 cents, while a 63-cent put on the same contract cost 1.18 cents.

    He mentioned some options spreads that producers might consider and said he’d also heard of growers in West Texas and Oklahoma taking advantage of favorable basis terms to forward contract a few 2017 bales.

    The forward contracting would be something to consider for reliable and/or insured portion of expected production, he added.

    Futures open interest grew 4,996 lots Friday to 272,698, with March’s up 773 lots to 155,593 and May’s up 1,919 lots to 56,569. Certified stocks increased 7,615 bales to 135,759.

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