Cotton futures closed sharply lower Monday on heavy investor liquidation as the market was discouraged by news a bank bailout deal may not win approval in the US Congress, brokers said. The benchmark December cotton contract fell 3.00 cents to finish at the day's low at 57.38 cents per lb, with the session peak at 60.30 cents. March lost 2.92 cents to 61.98 cents.
Volume traded in the December contract stood at 11,767 lots at 2:37 pm (1837 GMT). "It's (a) total meltdown," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, after the US House of Representatives rejected the $700 billion bailout plan to shore up credit-plagued financial markets.
"At the heart of the situation obviously was the on-going economic worries including the uncertainty of the government bailout plan," he said in a daily weekly commentary. The selling accelerated after the US House of Representatives defeated the bailout bill.
Analysts fear the credit crunch, which has sparked the worst financial crisis since the Great Depression will deflate demand for goods like cotton. The pressure on cotton was also aggravated by the spike in the dollar, the analysts said. The market has virtually ignored any fundamental factor in the cotton market.
The fall cotton harvest is getting under way and some in the trade are wondering if supplies will get tighter or demand will suffer in the 2008/09 marketing year (August/July). The next update on the outlook is the next monthly supply/demand report from the US Agriculture Department, which is due out on October 10.
Analysts said they see support in the December contract at 57 cents, with resistance at 57.75 and 58.75 cents. Volume traded in the cotton market Friday was 9,257 lots, exchange data showed. Open interest in the cotton market rose 694 lots to 203,108 contracts as of September 26, it added.
Comments
Comments are closed.