New York cotton near 1-1/2 year low, outlook poor

Cotton futures closed near a 1-1/2 year low Friday as the selling spree from the global financial crisis and a very bearish government crop report deflated the market, brokers said. The benchmark December cotton contract dropped the 3.00-cent limit to conclude at 49.44 cents per lb, with the session peak at 51.60 cents.
On the spot weekly charts, it was the lowest close for cotton since mid-May 2007. Since the spot contract finished trading at the start of September at 67.91 cents, the contract has lost 27.19 percent in value. March ended the 3.00-cent limit down at 53.87 cents. Volume traded in the December contract stood at 11,465 lots at 2:41 pm (1841 GMT).
"There's just no rest for the weary," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia. She said the market can only turn higher once the wave after wave of investment fund sales is exhausted, but there seems no sign that sales will soon abate. Cotton reeled from a crisis that has battered world markets in the worst financial crunch since the stock market collapse of 1929.
The fall was aggravated by a bearish supply/demand report from the US Agriculture Department. USDA reduced 2008/09 world cotton consumption to 122.31 million bales from 123.7 million last month. It then raised world 2008/09 cotton ending stocks to 55.45 million (480-lb) bales, from 52.32 million in last month's data.
"The USDA has fully acknowledged the global slowdown. You don't have any confidence in this environment we're in," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana. Johnson forecast that once the selling spree abates, cotton could rocket up as importers book orders. For now, the mood is decidedly glum.
Brokers believe the next level of support in the December contract would be at 49 cents, with resistance at 50 cents. Volume traded in the cotton market Thursday was 11,278 lots, exchange data showed. Open interest in the cotton market was not available at this time, it said. As of October 8, open interest stood at 181,718 contracts.