Posted: December 19, 2010 - 12:11am
Flirtation with a correction subsided last week as cotton futures soared from an underlying chart gap to within striking distance of a contract high close.
Prices for the week ended Thursday leaped 1,017 points to 146.12 cents in spot March, 837 points to 136.57 cents in May, 494 points to 125.13 cents in July and 239 points to 96.75 cents in new-crop December.
March’s contract high close is 147.11 cents on Nov. 9 and its lifetime high is 151.95 cents on Nov. 10. It filled on Wednesday much of a 198-point chart gap left from Monday’s high of 140.97 and Tuesday’s low of 142.95, then roared up the 400-point limit Thursday and closed two ticks off the session high.
The surge appeared linked mostly to speculative buying as sellers seemed virtually to vanish. Cotton, up over 80 percent in the year to date, is the leading performer in the Reuters-Jefferies commodity index.
Sharon C. Johnson, senior cotton analyst with Penson Futures in Atlanta, said speculative and limited mill buying has been concentrated in March.
“Commercials have moved their activity to May or July as mills are pricing farther out and are rolling short March holdings forward,” she said. “It is this activity on the part of specs and hedgers that explains the ongoing widening difference of March over May and July.”
Cash grower sales on The Seam slowed to 38,797 bales from 57,212 bales the previous week. Prices jumped 713 points to average 138.22 cents, reflecting a 792-point leap to 83.59 cents in premiums over loan redemption rates.
World values as measured by the Cotlook A Index hit a new all-time high at 173.30 cents at midweek, topping the prior record high of 172.40 cents on Nov. 10, and slipped Thursday morning to 171.35 cents after futures had cooled from overheated conditions on Wednesday.
The index gained 1,065 points for the week. A couple of U.S. growths, including Texas cotton, have remained at or near the top two slots among the world’s five most competitive.
In the news, a government report on U.S. retail sales suggested a strong start to the holiday shopping season for cotton goods.
Retail sales of clothing-accessories jumped 2.7 percent in November, according to Commerce Department data. October sales were revised up to a 1.2 percent gain from a previously reported increase of 0.7 percent.
Receipts at clothing and clothing accessories stores, among the strongest components of the report, showed the largest increase for this category since March.
Total retail sales increased 0.8 percent, exceeding a gain of 0.6 percent expected by economists polled by Reuters. Sales for October were revised up to 1.7 percent from a previously reported 1.2 percent gain.
U.S. all-cotton export sales for this season and next came in below expectations but stayed stout at 258,300 running bales for the week ended Dec. 9, though down from 436,600 bales the week before. Current-crop commitments hit 13.558 million bales, 89 percent of the USDA forecast.
All-cotton shipments dipped to 324,700 running bales, with upland exports down 6 percent from the previous week but up 44 percent from the prior four-week average. Shipments of around 362,400 running bales a week are needed to reach the USDA estimate.
Exports for the season of 3.347 million running bales, up 8.5 percent from a year ago, have amounted to around 22 percent of the USDA forecast, compared with about 26 percent of final shipments at the corresponding point last season. About 25 percent of the commitments have been shipped.
On the international scene, a rough estimate suggested India’s 2010-11 exports totaled 2.5 million to 3 million bales (375 pounds) as of Wednesday, Seshadri Ramkumar of Texas Tech, said in a report. Wednesday was the deadline for cotton exporters to ship an allowable 5.5 million bales.
Sources noted it was clear the export limit was not reached, said India-born Ramkumar, who has collaborated with India in textiles.
Textile Commissioner A.B. Joshi indicated in a telephone conversation the government would not be in a position to make a decision on shipment of the shortfall until it gets actual export data from ports, Ramkumar said. It could be the end of January when a decision is made, he added. It was believed the Cotton Advisory Board’s 32.5-million-bale crop estimate could be met.
Export issues will be settled at a central ministerial meeting of the departments of agriculture, textiles, commerce and finance.
Meanwhile, trend-following funds bought a net 1,747 lots in cotton futures with options during the week ended Dec. 7 to boost their net longs to 42,530 lots, according to the latest supplemental traders-commitments data from the Commodity Futures Trading Commission.
This marked the second week in a row they have been net buyers and followed four consecutive weeks of net selling that reduced their net long futures-options position to the lowest since Aug. 3.
Index funds sold a net 705 lots to inch their net longs down to 61,201 lots and traders with non-reportable positions shaved their net long holdings by 909 lots to 8,315.
Commercials increased their outright shorts by 6,914 lots and their outright longs by 6,782 lots. This edged their net shorts up a marginal 132 lots to 112,046.
Updated USDA supply-demand estimates showed U.S. ending stocks falling to 1.9 million bales, lowest since 1924-25, and a 1.19-million-bale increase from a month ago to 43.39 million in the world carryout, still the lowest in 15 years and the fourth consecutive year of decline.
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