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Weekly Cotton Comments                 07/01 05:06

   Cotton Pares Steep Loss as Acreage Concerns Mount     

   U.S. cotton plantings expanded 11% to 12.478 million acres but heavy acreage 
losses feared. New-crop export sales fell to six-week low. Crop continued to 
deteriorate. Abandonment already estimated at more than 2 million acres on the 
Texas High Plains. Funds and specs cut their overall net longs to the lowest 
since September 2020.

Duane Howell
DTN Contributing Cotton Analyst

   Cotton futures put together back-to-back daily gains totaling 536 points in 
most-active December, snapping a string of six losing sessions in a row and 
finishing the marketing week ended Thursday above the prior-day high amid 
concerns about heavy acreage abandonment.

   While shrugging off USDA's larger than generally expected planted acreage 
report, December still lost 317 points or 3.11% for the week to close at 98.84 
cents. It finished near the upper third of the week's 11.60-cent range from 
102.80 cents last Friday to 91.20 cents on Tuesday, its lowest price since Dec. 
29. December closed below $1 a pound last Friday for the first time for a 
most-active contract since Sept. 28, 2021.

   Maturing July, which entered the session with an open interest of 185 lots, 
lost 32.26 cents or 67.74% for the week to close at 103.94 cents. The inverted 
December-March spread narrowed 22 points to settle at 406. For the month, July 
shed 35.04 cents and December lost 23.61 cents.

   Cotton put in an impressive performance in contrast to weakness in the major 
U.S. stock indexes, energies, grains and metals, a veteran trader observed. The 
MSCI global stock index notched its biggest first-half of a year percentage 
drop on record Thursday, Reuters reported, while the U.S. benchmark S&P 500 had 
its steepest percentage drop -- 20.6% -- for the first six months since 1970.

   Volume increased to an estimated average of 39,600 lots per session from 
37,300 lots the previous week. Open interest declined 8,144 lots to 175,609, 
with December down 7,958 lots to 114,121, March up 2,123 lots to 28,817, May up 
1,109 lots to 10,216 and July up 1,076 lots to 9,046. Red December climbed 
1,244 lots to 12,538, the third largest OI.

   A mere 792 bales changed hands in online cash trading on The Seam. All were 
on Wednesday when December closed up the 400-point daily limit and were on the 
business-to-business exchange. Prices averaged 96.23 cents per pound, 
reflecting premiums over loan values of 55.20 cents. These have been the only 
sales, all on the business-to-business exchange, on The Seam since June 15.  

   The U.S. all-cotton planted area came in at 12.478 million acres, up 11.3% 
from 11.216 million seeded last year. Upland area is pegged at 12.322 million 
acres, up 11.1% from 11.089 million in 2021, and Pima or extra-long staple at 
156,000 acres, up 23.3% from 127,000.

   Pre-report estimates of analysts and traders had averaged 12.194 million 
acres, down from the March intentions of 12.234 million, according to a 
Bloomberg survey. Estimates had ranged from 11.9 million to 12.71 million acres.

   Massive waves of recent speculative long liquidation may have been linked 
partly to the approaching plantings report as well as the end of the month, the 
quarter and the halfway point of the calendar year. Now, fundamental traders 
appear keenly aware of much uncertainty on acres still standing in cotton and 
on ultimate abandonment.

   By regions, upland plantings rose by 7.9% to 2.51 million acres from 2.327 
million last year in the Southeast, by 14.5% to 1.86 million from 1.625 million 
in the Mid-South and by 11.9% to 7.78 million from 6.955 million in the 
Southwest. Upland plantings declined only in the West, dropping 5.5% to 172,000 
acres from 182,000.

   Upland plantings increased in 16 of the 17 major cotton-producing states. 
The biggest increase was in Texas on an expansion of 750,000 acres to 7.1 
million. Only Arizona, where persistent drought impacted planting decisions, 
showed a decrease on a decline of 38,000 acres to a record low of 82,000. 
However, Arizona's ELS plantings increased 11,000 acres to 20,000.

   Producers planted 95% of their upland cotton acreage with seed varieties 
developed using biotechnology, down 2 percentage points from last year. 
Varieties containing insect resistance (Bt) were planted on 3% of the acreage, 
unchanged from 2021. Growers planted herbicide-resistant varieties on 6% of the 
acreage, also unchanged, and stacked gene varieties containing both insect and 
herbicide resistance on 86%, down two points.

   On the demand front, net U.S. all-cotton export sales fell to a seasonal low 
of 95,700 running bales for this season and next for the marketing week ended 
June 23, down from 294,800 RB the previous week and 178,800 RB for the 
corresponding week last year.

   Upland net sales of 48,100 RB for 2021-22, up from a crop year low of 16,200 
RB the week before and 44,800 RB a year ago, went to 11 countries, led by 
Vietnam, China and Mexico. Cancellations were 36,000 RB.

   Net upland sales for 2022-23 fell to a six-week low of 46,800 RB, down from 
277,300 RB the prior week and 133,900 RB in forward sales a year ago. There 
were six buying destinations, topped by Turkey, Portugal and Mexico.

   All-cotton shipments slipped to 370,800 RB from 377,500 RB the previous week 
but were up from 284,400 RB last year. Upland exports of 364,400 RB, down 2% 
from the previous week and 5% from the four-week average, went to 22 countries, 
headed by China, Turkey and Vietnam.

   Combined shipments of upland and Pima for the season stood at 11.933 million 
RB, 2.407 million RB or 17% below a year ago. To achieve the USDA estimate, 
all-cotton shipments need to average approximately 448,200 RB per week over the 
five-plus weeks remaining in the marketing year.

   On the U.S. crop scene, cotton conditions continued to decline under extreme 
heat during the week ended Sunday as good to excellent fell an additional three 
percentage points to 37%, fair dipped a point to 34% and poor to very poor 
increased four points to 30%.

   Compared with a year ago, good-excellent was down 15 points, fair down eight 
points and poor-very poor up 23 points, according to USDA's weekly crop 
conditions-progress report. Since June 5, cotton rated good-excellent has 
fallen 11 points and poor-very poor has risen 15 points.

   States with the highest good-excellent ratings included California at 85%, 
Arizona at 83% (Virginia had 82% good and zero excellent), Arkansas at 78%, 
Louisiana at 77% and Alabama at 76%. At the other extreme, Texas had 17% good, 
zero excellent and 46% poor-very poor.

   U.S. sorghum growers had planted 90%, four points below a year ago and 
average, with G-E also down three points for the week and 27 points below last 
year.

   Squaring cotton increased 11 points for the week to 33%, up three points 
from last year and even with the five-year average, led by Louisiana at 83%, 
Arizona at 76%, Arkansas at 51%, Virginia at 49% and Georgia at 42%.

   Boll setting edged up two points to 8%, up a point from last year and the 
average, with Arizona at 17%, Virginia at 14%, Texas and Louisiana at 12% and 
Georgia and California at 5%.

   Drought, excessive heat and winds have taken a heavy toll on the Texas High 
Plains crop, the major cotton area of the state and nation. Estimates of High 
Plains abandonment already have soared beyond 2 million acres and a large 
additional acreage is considered in jeopardy.

   "This (cotton crop) is a wreck," said Brad Heffington of Littlefield, 
describing conditions in an expansive area northwest of Lubbock. "Fifty-seven 
percent of my irrigated cotton has failed and I probably have more left than 
most."

   Some producers in the northern High Plains have replanted failed cotton 
acres to sorghum and others are expected to leave the ground fallow because of 
high input costs. Strong winds and hailstorms have taken a toll on cotton there 
and in Oklahoma.

   Producers in the 42-county area served by the Lubbock-based Plains Cotton 
Growers, Inc., last year planted 4.011 million acres of cotton and abandoned 
some 553,700 acres prior to harvest. Irrigated acreage has accounted for around 
40% of the planted cotton area in recent years, including lightly watered 
ground where supplemental rainfall is frequently needed. The other 60% is 
planted on dryland farms.

   On the money-flow front, trend-following hedge funds and speculators sold 
4,624 lots to drop their net longs to 48,900 in cotton futures-options combined 
during the week ended June 21, according to the latest traders-commitments 
report of the Commodity Futures Trading Commission.

   Index funds sold a net 872 lots, shaving their net longs to 71,227. The 
overall net longs held by the hedge and index funds plus the non-reportable or 
mostly speculative traders fell to 120,127 lots, a new low since late September 
2020.

   Commercials were on the other side, buying a net 5,494 lots on the covering 
of 10,163 shorts and liquidation of 4,669 longs. Mills continued belated 
on-call July fixations prior to first notice day last Friday.

   Prices during the reporting week spanned a 350-point range in July from 
142.50 to 146 cents and a 773-point range from 121 to 113.27 cents in December. 
Combined open interest fell 6,878 lots to a delta-adjusted 236,562, lowest 
since August 2018.

   Meanwhile, unpriced on-call mill sales declined 2,109 lots to 61,483 in 
December last week, CFTC data showed after the close Thursday. Unfixed producer 
purchases fell 492 lots to 23,113. This resulted in the net call difference 
declining 2,601 lots to 38,370, 32.59% of the futures OI. The unpriced mill 
sales outweighed the unfixed producer purchases by a ratio of 2.66:1.




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