An abrupt revision in the transportation cost factor resulted in a jump in the adjusted world price and a corresponding decline in the marketing loan gain. Mills priced 1,010 on-call lots in May.
Cotton futures took a rather wild ride Friday, plunging to triple-digit losses in hectic dealings overnight, rallying to near unchanged during the morning and fading into the close.
Spot May settled down 61 points to 60.03 cents, in the upper half of its 139-point range from down eight points at 60.56 cents to down 147 points at 59.17 cents. It posted the session high in the early minutes of the overnight session and the low around 5:30 a.m. CDT.
July lost 83 points to close at 60.02 cents and December shed 81 points to settle at 59.21 cents.
For the week, the market settled mixed, with May down four points, July up 46 points and December up 37 points. May options expired Friday.
Volume slipped a bit to an estimated at 55,789 lots from 56,067 lots the prior session when spreads accounted for 31,510 lots or 56%, block trades 2,000 lots, EFS 1,010 lots and EFP 860 lots. Options volume totaled 3,845 calls and 3,180 puts.
Uncertainties about the potential market reaction to an abrupt USDA announcement late Thursday on a change in the formula used in figuring the adjusted world price may have contributed to driving current-crop prices to session lows overnight.
Without any prior announcement, USDA reduced the transportation cost component to 14.53 cents from 16.55 cents.
The change resulted in the AWP for the week ending next Thursday jumping to 49.45 cents, reflecting a 2.02-cent reduction in the transportation cost estimate to the Far East.
The AWP calculations reported here Thursday — and also used by other industry sources in running daily tabs — thus showed an incorrect AWP for the program week ahead.
The new calculations based on the combined transportation-quality adjustment of 17.73 cents instead of 19.75 cents put the weekly marketing loan gain at 2.55 cents rather than the previously figured 4.57 cents.
Pressure on prices may have stemmed partly from reports that sales from ChinaΆs huge reserve stockpile will begin in May and extend through August, forecasts for beneficial rains in the Texas High and Rolling Plains and negative technical considerations.
Meanwhile, mills priced 1,010 on-call lots and producers fixed 448 lots in the soon-to-mature May contract last week, according to the latest Commodity Futures Trading commission data.
With 10 trading sessions left at the time before first notice day, the unpriced May positions declined to 10,413 lots on the mill side and 3,854 lots on the producer side.
The net call difference dropped to 6,559 lots, which represented 8.52% of MayΆs declining open interest, compared with 6.89% a week earlier. The unfixed mill position outweighed that of producers by a little changed ratio of 2.70:1.
Among other on-call activities, mills priced 280 lots in July and added 550 lots in December and 156 lots in March, while producers added 75 lots in July, 170 lots in December and 220 lots in July 2017.
Futures open interest declined 2,725 lots Thursday to 206,021, with MayΆs down 6,864 lots to 38,330 and JulyΆs up 5,031 lots to 101,538. Stocks in deliverable position were unchanged at 39,536 bales.
