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November 24th, 2017

Most-active March advanced 196 points for the week ended Wednesday to close at 71.14 cents, its highest settlement since Sept. 11. It jumped from the low of 69.06 at the start of the period to the high of 71.76 on Wednesday and finished in the upper quarter of the 270-point range.

March triggered buy stops, surging through the midpoint (70.76) of its 963-point range for 2017 from the contract high of 75.57 cents on March 20 to the low of 65.94 cents on July 14.

December, facing first notice day on Friday, gained 153 points to close at 70.74 cents, rallying from 69.21 on Nov. 7 to 72.52 on Tuesday and ending just below the middle of the 331-point range. It traded up to 149 points over March, but March closed at a 40-point premium.

Traders not wanting to risk having to make or take delivery had to close or roll December positions prior to first notice day on Friday. December’s open interest coming into Wednesday’s session had fallen 35,948 lots from a week earlier to 2,898. Its last trading day is Dec. 6.

The market was closed Thursday for Thanksgiving, and a delayed opening and early close were scheduled for Friday. Stocks in deliverable position totaled 47,951 bales.

Cash online trading climbed to a system-wide 88,931 bales from 54,421 bales on The Seam. Prices rose to an average of 67.85 cents from 67.22 cents, reflecting gains to 16.80 cents from 16.12 cents in premiums over loan rates. Daily price averages ranged between 67.10 and 68.84 cents.

Bullish technical price action, heavy unpriced mill on-call sales and strong export demand illustrated by commitments having reached 67 percent of USDA’s 2017-18 shipments forecast spurred the rally. Commitments were up 39 percent from a year ago when exports were the second largest ever.

The rally was reported to have quietened export demand and prompted concerns about the possibility of sales cancellations if prices continued to move higher, with a sizable batch of unfixed call sales resting in unshipped export commitments.

Quality issues in some U.S. and foreign supplies and lower-than-expected yields in some U.S. areas drew attention. Leaf grades averaged a higher-than-usual 4 in Delta cotton classed at Dumas and Memphis and micronaire averaged in the discount area of 3.3 at Lubbock.

Slow export shipments – about 17 percent below a year ago – have been blamed partly on quality issues. Anecdotal reports from a few areas in various parts of the Cotton Belt fanned questions about whether the U.S. crop can make the projected record 900 pounds per acre.

U.S. cotton harvesting again advanced at a 10 percentage point clip to reach 74 percent completed during the week ended last Sunday, up from 66 percent a year ago and the five-year average of 72 percent, according to USDA’s progress report.

The pace was up from 66 percent harvested a year ago and the five-year average of 72 percent, widening the lead from a week earlier by four points and two points, respectively.

The Texas crop was 67 percent harvested, up from 55 percent a week earlier, 46 percent a year ago and 60 percent on average. Producers reported high humidity slowed the harvest in the High and Rolling Plains and the Edwards Plateau.

Lower micronaire readings, a measure of fiber maturity, figured prominently in round-table discussions at a biweekly meeting of the Lubbock-based Plains Cotton Growers, Inc. advisory committee.

Below-normal heat units in August, late-season cool, cloudy weather and an early freeze all contributed to the low mikes, especially in the northern area. Late plantings and hail and windstorms also were factors. Still, the High Plains crop is estimated at the third largest on record.

Micronaire in the discount range of 3.4 and lower totaled 60.8 percent in cotton classed at Lubbock during the week ended Nov. 16. Lower mikes are associated with lower boll weights and thus yields. This may explain why some growers say yields haven’t met expectations.

“I haven’t heard of anyone saying yields beat expectations,” commented Steve Verett, PCG executive vice president. “I’m sure there are some, but I haven’t heard of any.”

There are areas of good micronaire, however, and color grades have improved. Color grade 31 (middling) and higher rose to 89.4 percent at Lubbock from 74 percent two weeks ago and light spots fell to 7.6 percent from 21.7 percent. Leaf grades averaged 2.75.

At Lamesa, in the southern High Plains, miconaire averaged 3.78 for the week and 3.85 for the season. Overall, industry people were encouraged with quality except for the discount mikes.

Harvest progress was reported “all over the place,” with some producers finished and others just getting started. About 45 percent to 50 percent had been harvested in some counties and about 25 percent in others. Good harvest weather prevailed Thanksgiving week, and forecasts indicated it would continue the next week to 10 days.

Meanwhile, trend-following funds nudged their net longs down 63 lots to 44,284 in ICE cotton futures-options combined during the week ended Nov. 14, a period that covered the expiration of December options, data from the Commodity Futures Trading Commission showed.

They liquidated 392 longs and covered 329 shorts. Index funds poked their net longs up 371 lots to 70,279, while non-reportable traders bought 1,796 lots to flip to net long 51 lots from net short 1,745 lots.

Commercials sold a net 2,103 lots, liquidating 13,846 longs and covering 11,743 shorts to raise their net shorts to 114,614. Combined open interest fell 37,722 lots to 263,598.

In futures only, non-commercials raised their net longs 2.3 points to 22.6 percent of the open interest. They bought a net 3,145 lots, covering 6,039 shorts and liquidating 2,894 longs to boost their net longs to 51,143 lots. Futures open interest declined 9,301 lots to 226,636.

Duane Howell of The Avalanche-Journal.

See Also: Coffee, Cocoa, Cotton, Orange Juice, Sugar