Cotton Sells Off After Yield Cut


Cotton futures closed Friday ~20 points off their lows, but still 58 to 115 points in the red. The March contract printed a 200 point range from -147 to +54 points. The March contract completed the week with a net 2 cent gain. Daily futures trading limits will expand to 4 cents per pound (400 points) since prices are back above 80 cents. USDA left the average cash price at 77 cents/lb. 

The weekly Commitment of Traders report had managed money funds as buyers in cotton during the week that ended 12/15. That extended the group’s net long by 1,534 contracts to 2,229. Commercial cotton hedgers were adding short hedges for a 2.9k contract stronger net short of 41,204 contracts. 

USDA’s monthly data cut cotton yield by 18 lbs/acre to 765 – now the weakest since 2003, though similar to 2015. That on net reduced supply by 310k bales to 12.78 million. USDA cut domestic use by 150k, and lowered the unaccounted line, for a net 100k bale tighter carryout of 3.1 million bales. On the world stage, the WAOB showed cotton production was 540k bales lighter and stocks were up by 900k bales to 82.4 million. USDA increased the Chinese import by 500k to 11 million. 

The NASS Cotton Ginnings report showed 8.481 million bales were ginned through Dec. That is 9% behind last year’s pace and 17% behind the average pace. The weekly update from AMS showed 992,170 bales were classed this week for a season total of 8.805 million bales.

USDA’s weekly Cotton Market Review showed there were 60,915 bales sold at spot this week at an average price of 75.86 cents. That had the season’s total cash sale up to 261,362 bales, compared to 108.7k last season. The Cotlook A Index for 12/7 was 89.95 cents. The AWP for the week was lowered by 55 points to 63.63 cents/lb. ICE stocks were shown at 6,186 bales for 12/7. 

Mar 24 Cotton  closed at 81.44, down 115 points,

May 24 Cotton  closed at 82.04, down 103 points,

Jul 24 Cotton  closed at 82.45, down 84 points

On the date of publication, Alan Brugler did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.