US cotton futures closed sharply lower in volatile trading on Thursday, as profit taking pulled the market off its latest record high on a day when the ICE Futures US exchange moved to curb speculation. Cotton futures closed with the biggest one-day decline since early December, Thomson Reuters data showed. The market had surged almost 30 percent since the middle of January to the highest level in almost 150 years.
The key March cotton contract on ICE Futures US slid 4.36 cents to close at $1.7186 per lb. The price swung wildly from $1.8122, up the 5 cent limit, to $1.7122, down the 5 cent limit. Total volume hit 50,500 lots, the most in 2-1/2 months and more than 150 percent above the 30-day norm, Thomson Reuters preliminary data showed.
Analysts said many investors liquidated long market positions on a day that ICE moved to tighten control of positions in the spot contract before delivery. Separately, the CFTC approved an expansion in the daily trading limits. "Spec attitudes are they have made a lot of money and the heightened awareness that both the exchange and CFTC are now going to be getting involved encouraged some selling," said Mike Stevens, an independent analyst from Mandeville, Louisiana.
The market jumped early on panic buying as tight supplies forced overseas mills to scramble for cotton, dealers said. There is also a large on-call position in the market from cotton buyers who purchased the fibre but now need to fix the price of their cotton. "Finally, we did enough (in the rally) to get folks long enough," said Sharon Johnson, senior cotton analyst for brokerage Penson Futures in Atlanta, Georgia.
The market will now turn its attention to industry group the National Cotton Council of America which will release its annual plantings survey for cotton at its annual meeting in San Antonio, Texas on Saturday. The data is normally handed out late on Friday, but the NCC said it will instead be released on Saturday around 10:30 am EST (1530 GMT).
A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings from 12.48 million to 12.53 million acres, a 5-year high and an increase of around 15 percent from last year's cotton sowings of 11.04 million acres. The United States is the biggest fibre exporter in the world and the anticipated increase in plantings is seen by some in the trade as not enough to meet robust global cotton demand.
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