DTN Cotton Close: Settles on Sharp Losses

    Photo: Larry Stalcup, AgFax Southwest Cotton

    News out of China, including restricting non-spinners from participating in the auctioning of state reserves, and unexpectedly widespread overnight rains on the Texas Plains weighed on sentiment. China also set to boost its cotton imports.

    Cotton futures closed on sharp losses Monday, with spot July and December finishing below lows of the previous session.

    July settled down 120 points at 92.10 cents, just off the low of its 245-point range from up 122 points at 94.52 to down 123 points at 92.07 cents. December closed down 142 points at 90.94 cents, trading within a 279-point range from 93.55 to 90.76 cents.

    Volume slipped to an estimated 52,000 lots from 59,435 lots the prior session when spreads accounted for 32,050 lots or 54%, EFS 870 lots and EFP 41 lots. Options volume dipped to 26,371 lots (16,290 calls and 10,081 puts) from 33,163 lots (25,564 calls and 8,599 puts).

    Cotton news from China, including restricting non-spinners from participating in the auctioning of state reserves, and unexpectedly widespread rainfall overnight in the droughty Texas Plains weighed on market sentiment.

    China also is set to boost its cotton imports by issuing additional import quotas to mills, the China Cotton Association said, a move seen as another step toward meeting the demands of top exporter the United States, Reuters reported.

    The association, which lobbies the government on behalf of cotton farmers and processors, said the soon-to-be released additional quotas were one of the measures the government was taking to help to ease recent market volatility.

    China, once the world’s top cotton importer, has seen its imports shrink from 24.53 million bales in 2011-12 to 5.03 million bales last season and 5.1 million estimated for 2017-18 owing to its efforts to reduce government stockpiles. Now, after several years of auctions to lower state stocks and with demand recovering, the market has become concerned about supplies.

    China’s domestic cotton futures have rallied nearly 18% since early April, Reuters reported, fueled in part by worries over crop damage from heavy rains as well as by heavy speculation.

    Earlier, the China National Cotton Reserves Corp., which manages China’s state cotton stockpiles, said it would restrict purchasing at its daily auctions to textile manufacturers, effective Monday.

    Meanwhile, all but three of the National Weather Service’s 35 cooperative reporting sites in the Texas Plains around Lubbock got at least some rain overnight, with amounts ranging from 0.05 of an inch to 0.94 inch and averaging around a third of an inch. An inch and more fell at some West Texas Mesonet sites.

    A few thunderstorms may develop Monday afternoon and evening, mainly from the southeast Panhandle through the Rolling Plains, forecasters say, and a couple of strong or severe thunderstorms are possible Tuesday.

    Many locations in the western High Plains ended May with barely a few hundredths of an inch of rain for the month to about half an inch, at least 2 inches below normal. Lubbock got 1.26 inches, 1.04 inches below normal, while temperatures ranged from 47 degrees on May 5 to 106 degrees on May 30 and averaged 78 degrees, 8.2 degrees above normal. This was by the hottest May on record at Lubbock.

    Certified stocks grew 598 bales to 76,983 on Friday. Open interest grew 4,304 lots to a record 322,153, topping the old mark set on Jan. 25. July’s OI fell 4,819 lots to 99,811 and December’s rose by 7,332 lots to 172,358.

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