DTN Cotton Close: Mixed As July Ends Lower

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    Fed minutes signaled rate increase in June. Traders awaited U.S. weekly export sales-shipments report. Global 2018-19 global cotton trade forecast at six-year high. December grabbed the open interest lead.

    Cotton futures settled mixed Wednesday as the inverted July-December straddle again weakened after December grabbed the open interest lead.

    July, the only loser among traded contracts, closed down 39 points to 86.96 cents, in the lower quarter of its 103-point range between 86.72 cents and 87.75 cents. December edged up 21 points to settle at 84.05 cents, in the upper third of its 117-point range between 83.26 cents and 84.43 cents.

    Federal Reserve officials at their meeting this month signaled they were likely to raise their benchmark short-term interest rate at their June meeting and debated an evolving policy strategy that soon would no longer try to stimulate economic growth, Dow Jones Newswires reported.

    If the economy performs as expected, “it would likely soon be appropriate for the committee to take another step” in raising rates, according to minutes of the Fed’s May 1-2 meeting, which were released shortly before the cotton close.

    Volume slowed to an estimated 36,500 lots from 43,437 lots the prior session when spreads accounted for 17,839 or 41%, EFP 933 lots and EFS 477 lots. Options volume declined to 12,114 lots (7,735 calls and 4,379 puts) from 26,900 lots (19,309 calls and 7,591 puts).

    Traders awaited the U.S. weekly export sales-shipments report from USDA on Thursday. Prices during the reporting week ended last Thursday ranged from 83.36 cents to 85.69 cents, basis July.

    Net upland sales the prior week totaled a combined 382,600 running bales for this season and next, including 153,300 RB for 2017-18 and 229,300 RB for 2018-19. Upland shipments were 434,400 RB, maintaining a pace well ahead of the pace needed to make the USDA estimate.

    Upland sales the last four weeks have averaged 212,000 RB for this season and 254,100 RB for next season, compared with 285,400 RB and 91,100 RB the prior four weeks, respectively. Shipments of upland have averaged 466,800 RB, up from 438,100 RB the previous four weeks.

    Looking ahead, USDA expects global cotton trade in 2018-19 to rise 4% from the prior year to 41.1 million bales, the highest in six years, linked to growing mill use in import-oriented consumers such as Bangladesh and Vietnam and increased import expectations for China.

    For Bangladesh and Vietnam, imports are expected to grow 7% to 7.9 million bales and 13% to 7.7 million bales, respectively. China is forecast as the third largest importer, with imports rising 37% to 7 million bales amid growing mill demand and reduced supplies.

    Country forecasts for global exports indicated U.S. cotton will face increased competition. Exportable supplies from Brazil and Australia are projected to hold U.S. exports even with 2017-18 at 15.5 million bales.

    For Brazil, the second leading exporter, shipments are expected to grow 600,000 bales to 4.8 million, while exports from Australia also are forecast to climb 600,000 bales to 4.5 million. In contrast, small export declines are forecast for India and Uzbekistan to 4.25 million and 1 million bales, respectively.

    The U.S. share of the expanding global cotton trade is expected to slip to 38% from 39.5% in 2017-18.

    Certified cotton stocks deliverable on futures contracts were unchanged at 77,225 bales on Tuesday, according to the ICE daily report. Open interest gained 2,334 lots to 297,140, with July’s down 1,195 lots to 127,075 and December’s up 2,570 lots to 128,977. This marked the first time that December’s OI has topped July’s.

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