DTN Cotton Close: Falls to 3 Week Low

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    U.S. upland classing reached 17.461 million RB, up about 17% from last year and roughly 87% of the crop estimate. Drought conditions reported in various areas of the Cotton Belt, with Lubbock experiencing its third longest dry period on record.

    Cotton futures closed on steep losses for the second straight session Monday, with March skidding to a 13-session low and settling near there on heavy volume.

    March lost 212 points to settle at 78.36 cents, its lowest finish since Jan. 9. It traded within a 247-point range from up 14 points at 80.62 cents to down 233 points at 78.15 cents and posted its biggest closing loss since it finished down the 300-point daily limit on Sept. 9.

    May closed down 203 points to 79.19 cents and July settled down 193 points at 79.79 cents. The other contracts dropped 22 to 142 points, with December down 60 points at 74.91 cents.

    The break below the low of the bearish reversal of Jan. 12 promoted long liquidation selling on the heels of a slump in export demand and a buildup to a record open interest amid speculative buying.

    Volume rose to an estimated 67,743 lots from 47,262 lots the prior session when spreads accounted for 23,374 lots or 49% and EFP 799 lots. Options volume climbed to 21,019 lots (9,464 calls and 11,555 puts) from 17,519 lots (7,448 calls and 10,071 puts).

    On the crop scene, U.S. upland classing dipped to 572,005 running bales during the week ended Thursday from 598,507 RB the prior week, figures from the USDA’s Agricultural Marketing Service showed Friday.

    The count for the season reached 17.461 million RB, roughly 87% of the January upland production estimate and up 17% from 14.975 million RB graded a year ago when about 93% of the final output had been graded.

    Tenderable cotton made up 54.4% of the week and 69.8% for the season, compared with 61.8% and 70.7%, respectively, a year ago. Samples for grading came from 258 gins, down from 285 the prior week.

    Classing of Pima slipped to 23,493 RB from 27,698 the week before, bringing the extra-long staple count for the season to 593,050 RB, up from 423,495 RB last year. The all-cotton total for the season rose to 15.454 million RB, up from 15.494 million RB last year.

    Drought conditions expanded in the Texas High and Rolling Plains. No measurable precipitation has been received at Lubbock in 80 days, the third longest dry period on record behind 88 days in 1921-22 and 98 days in 2005-06.

    Precipitation has remained below normal across the Southeast despite recent moisture from frontal systems, AMS reported. This has resulted in low stream flows, drying soils and expanding drought conditions across much of the region. Consistent wet weather is needed to recharge subsoil moisture and relieve moderate-to-severe drought in areas from the Gulf Coast to the Central Carolinas and Virginia.

    Ginning continued across the Southeast where many gins had gone to gin days. Some larger gins that had a late start in the season continued to operate at capacity.

    Severe drought conditions declined in Arkansas and the Bootheel of Missouri as a result of recent precipitation, according to the U.S. Drought Monitor. Soil moisture remained adequate in the cotton-producing areas of Tennessee. In the South Delta, moderate-to-severe drought improved in northeastern Louisiana and parts of Mississippi.

    In the Desert Southwest, cotton areas of Arizona were in moderate-to-severe drought status. Seedbed preparations advanced around Yuma and pre-planting irrigations were active. Planting will begin in February.

    Abnormally dry conditions existed in several counties of the San Joaquin Valley. The overall Sierra Nevada Mountain water content stood at 3 inches for Jan. 22. The good news is that reservoir storage was ranked above average owing to plentiful snowpack in 2017.

    Futures open interest declined 3,352 lots to 317,392 on Friday from the prior day’s record high, with March down 4,428 lots to 152,384 and May’s up 572 lots to 86,543.

    Certified stocks grew 3,964 bales to 52,645, reflecting additions of 4,000 bales at Dallas-Fort Worth and 100 bales at Memphis and decertification of 36 bales at Houston.

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