By Duane Howell
For A-J Media
Cotton futures fell to new contract lows last week and to lows not seen since January 2015 before snapping a four-session losing streak.
Most-active May lost 194 points for the week ended Thursday to settle at 57.76 cents. It reversed from a brief probe to 60.16 cents on Monday — the third time in five sessions it failed to hold above 60 cents — and hit its new contract low of 57.26 cents on Wednesday.
Maturing March lost 175 points to close at 58.16 cents, July fell 220 points to 57.61 cents and December shed 232 points to 57.40 cents. March delivery notices had totaled 141 lots and moved into strong hands.
At its new low of 57.16 cents, spot March was within 11 ticks of the low set on the March 2015 contract on Jan. 23, 2015.
Ongoing uncertainties on ChinaΆs reserves cotton policy continued to weigh on market sentiment.
Cash online grower sales slowed to 20,468 bales from 53,511 bales on The Seam. Daily average prices ranged from 51.48 to 54.62 cents, with premiums over loan repayment rates ranging from 6.40 to 9.63 cents.
The futures market inverted in actively traded contracts through December, with 2015-crop premiums possibly linked to tight availability of the more desirable qualities.
U.S. upland cotton classing dwindled to 55,313 running bales during the week ended Feb. 18 from 106,366 RB the previous week, according to the latest USDA figures. This was the final in-season national report.
With 99 percent of the estimated crop classed and tenderable cotton at 55.4 percent, the tenderable percentage was on track to rank as the second lowest in 20 years.
The lowest was 52.0 percent in 2002 and the highest was 74.6 percent in 2003. Tenderable cotton totaled 70.1 percent in 2014, 64.4 percent in 2013, 61 percent in 2012, 70.2 percent in 2011 and 67.2 percent in 2010.
Classing for the season inched up to 12.026 million RB of upland and remained at 415,508 RB for Pima. The all-cotton count reached 12.441 million RB, down 21 percent from the final 2014 crop estimate.
The market showed muted reaction to lower-than-expected U.S. weekly export sales. Net upland sales for shipment this season of 110,600 RB during the week ended Feb. 18 fell 52 percent from the four-week average.
All-cotton sales of 121,400 RB brought 2015-16 commitments to 6.771 million. Commitments trailed year-ago bookings by 2.905 million RB, or by 30 percent, and were 73 percent of the USDA export forecast. A year ago, commitments were 89 percent of final 2014-15 shipments.
Net sales for shipment next season of 18,700 RB raised 2016-17 commitments to 919,300. The lead over forward bookings a year ago narrowed by 47,300 RB to 203,200.
All-cotton shipments of 180,500 RB boosted the total for the season to 3.642 million RB. Exports lagged year-ago shipments by 712,000 RB, or by 16 percent. Shipments were about 40 percent of the USDA projection, about the same as the percentage of final 2014-15 exports at the corresponding point last season.
To achieve the USDA forecast, shipments need to average roughly 242,300 RB per week, while sales averaging around 106,300 RB would match the export forecast. Some 2015-crop cotton will be needed to meet 2016-17 commitments early next season prior to volume movement of the new crop.
On the weather scene, many people have wondered what happened to the wetter-than-normal winter predicted because of El Nino.
Most of Texas has been drier than normal by an inch to 3 inches the last 30 days, says an AgriLife Extension Service report, citing the National Weather Service.
“ItΆs been fairly dry since the beginning of 2016,” John Nielsen-Gammon, state climatologist at Texas A&M, acknowledges in the extension report, “but from October through December, we were generally quite wet.”
In fact, he noted, October-December rainfall totaled several inches above the average for previous strong El Nino periods.
“While weΆve had a dry winter, the combined fall and winter have been wetter than normal,” he said. “Typically, you get one or two dry months within an El Nino. ThereΆs no guarantee the whole thing is going to be wetter than average.”
The current El Nino remains strong, with no sign itΆs going to weaken until spring or summer, Nielsen-Gammon said.
Lubbock at midweek had recorded only 0.39 of an inch of precipitation since Jan. 1, compared with 1.29 inches for the normal and 1.69 inches a year ago. Snowfall has totaled 13.3 inches since Dec. 1, up from the normal of 6.4 inches and 7.2 inches last year.
This normally is a dry period in the semi-arid region. Rainfall probabilities typically begin improving about the third week of March, continuing into the traditional opening of the optimum cotton planting period on May 5.
A USDA weekly crop report showed topsoil moisture as of Feb. 21 was adequate to surplus in 57 percent and 66 percent of the northern and southern districts on the Texas High Plains, respectively.
Subsoil moisture was rated adequate to surplus in 81 percent of the northern district and 73 percent of the southern counties. Cotton, with its deep taproot, is built to take advantage of subsoil moisture reserves during the summertime.
In international news, ChinaΆs cotton imports totaled 95,581 tons (438,995 480-pound bales) in January, down 41 percent from a year earlier.
The USDAΆs latest forecast of ChinaΆs imports for the 2015-16 marketing year ending July 31 is 5 million bales, down 40 percent from 8.28 million bales imported last season.
Meanwhile, trend-following funds extended their net short position by 4,313 lots to 16,933 in cotton futures-options combined during the week ended Feb. 16.
Index funds boosted their net longs by 2,959 lots to 61,214, while nonreportable traders raised their net shorts by a net 976 lots to 3,358. Commercials reduced their net short position by a net 2,329 lots to 40,975, covering 17,728 shorts and liquidating 15,399 longs.
