US cotton futures fell Tuesday on speculative sales and switch pressure after an early boost provided by firm cotton values in No. 1 consumer China petered out, brokers said. The market remained wary of any hint that China may tighten monetary policy as prices appear to be consolidating following their correction from an all-time high hit last week.
The benchmark March cotton contract on ICE Futures US fell 2.04 cents to trade at $1.3216 per lb, moving from $1.3043 to $1.3820. Spot December lost 2.14 to $1.3661. "They're trying to pile out of (the spot December cotton contract) as much as possible," said Bill Raffety, an analyst for commodity brokerage Penson Futures.
The December cotton contract goes into delivery next week. In China, the Zhengzhou Commodity Exchange's May cotton contract last traded Tuesday at 28,330 yuan per tonne, up 440 yuan on the day. Cotton prices had been rallying since July due to strong mill demand from China, tight stocks and buying by funds who felt cotton was undervalued.
Despite the near 20 percent fall in values last Thursday and Friday, the US cotton market is still the top performing commodity on the Reuters Jefferies Commodity Index, up nearly 75 percent year to date. Analysts said the initial market advance on Tuesday was spurred in part by talk that mills bought a large amount of US cotton at an industry meeting last week.
One said sales likely hit 500,000 (480-lb) bales. Another said they stood at more than 1 million bales. Fundamentally, analysts feel cotton's outlook remains strong because the level of mill demand is high and tight supplies would mean firm prices going into the spring of 2011.
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