New York cotton near five-week low

Cotton futures settled on Wednesday near a five-week low as the speculative fund selling that hammered the grains complex spilled into the ring and analysts say more losses are likely if fund accounts keep pounding grains contracts. ICE Futures' open-outcry March cotton contract fell the 3.00-cent limit to settle at 66.83 cents a lb, with the session high at 69.25 cents.
On a spot closing basis, it was lowest performance for cotton since late December. The rest lost 3.00 cents as well, with May cotton at 68.61 cents and the new-crop December cotton contract at 74.85 cents. ICE March electronic cotton futures declined 2.78 cents to 67.05 cents at 2:43 pm EST (1943 GMT), moving from 66.83 to 70.16 cents.
"It's liquidation caused by outside markets," said Mike Stevens of brokers SFS Futures in Mandeville, Louisiana, alluding to the rout in grains futures in Chicago. Cotton is tracking the performance of grains contracts because American farmers are mulling whether to switch from sowing cotton to planting corn or soybeans.
Stevens and other dealers said the cotton market also built up a large long position over the past few weeks, so much that when investors liquidated their positions, the selling pressure on cotton was immense. Once the March contract slid below 68 cents, automatic pre-placed computer "sell" orders kicked in and accelerated the fall in the market, market sources explained.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said attempts to calm world markets spooked by a recession through rate cuts may have come "too late to offset the ongoing negative impact to global cotton consumption through the remainder of this crop year."
"The timing of the current weak economic picture could not occur at a worse time as Chinese purchases must pick up over the next several months, but that is the reality of the situation we find ourselves in," she added. Traders said they feel support in the March open-outcry cotton contract was at 66 cents, with resistance at 68 cents.
Open-outcry volume Tuesday was at 2,291 lots and screen business was at 27,653 lots. Open interest in the cotton market fell 918 lots to 280,898 lots as of January 22, exchange data showed.