Cotton gains as rains in Texas raise harvest delay concerns

ICE cotton futures rose on Thursday, supported by concerns of a delay in harvest of the natural fibre crop in top cotton producing state Texas due to rains in the region. Cotton contracts for December settled up 0.32 cent, or 0.47 percent, at 68.97 cents per lb, after two straight sessions of declines. They traded within a range of 68.26 and 69.3 cents a lb.
"A weaker dollar and some showers over Texas are supporting the market," said Anestis Arampatzis, risk management consultant with INTL FCStone.
The dollar index was down 0.29 percent. The US Department of Agriculture reported net upland sales of 194,200 running bales (RB) for 2017/2018 crop year in the week ended Sept. 21. This was slightly lower from the week before but up 23 percent from the prior 4-week average. For 2018/2019 net sales of 8,500 RB were reported.
Exports of 131,900 RB were down 25 percent from the previous week. "Lower exports do not necessarily mean bad figures. The figure should be smaller and smaller until the new crop is harvested because the US is simply selling the leftovers. On the sales front 200,000 RB are not that bad," Arampatzis said. US, the top exporter of the fibre, could harvest its largest crop in about a decade this year, analysts said.
US cotton output was seen at 21.76 million bales for 2017-18 compared with 20.55 million bales production projected last month, as per the World Agricultural Supply and Demand Estimates (WASDE) report released earlier this month. "Hurricanes in North America temporarily raised fears of a supply-side shock. However, calendar spreads are narrowing from steep backwardation, which is illustrative of short-term supply concerns easing as cotton bales emerge unscathed from recent weather events," BMI Research analysts said in a note.
The market now awaits the October WASDE report for damage assessments from hurricane Harvey in Texas and Irma in Georgia, the second major cotton producing state in the United States. ICE cotton futures touched a contract high of 75.75 cents per lb on Sept. 8, on worried about crop damage from two catastrophic hurricanes.
Total futures market volume fell by 487 to 12,156 lots. Data showed total open interest fell 937 to 233,507 contracts in the previous session. Certificated cotton stocks deliverable as of Sept. 27 totalled 1,683 480-lb bales, down from 1,772 in the previous session.