Benchmark US cotton futures tumbled on Monday amid professional sales, scuppering a brief recovery late last week and opening the door to further declines this week, analysts said. Dealers said selling by investors and producers was behind the drop. The benchmark July cotton contract on ICE Futures US, which ended down 3.57 cents, or 2.3 percent, at $1.5445 per lb.
New-crop December cotton fell 3.87 cents, nearly 3 percent to $1.2706 cents per lb. Volume traded was almost 11,000 lots, over 50 percent below the norm, Thomson Reuters preliminary data showed."You've got technical weakness," said Mike Stevens, an independent cotton analyst in Louisiana. "It's acting poorly." The level of investor interest in the cotton market is at its lowest level since July 2010 before futures embarked rallied to record highs in early March.
Open interest on Friday fell to a 9-1/2 month low at 153,644 lots. Once the July contract failed to extend higher following Friday's strong bounce, the drifting market stumbled into automatic sell-stop orders, dealers said. Stevens said another source of pressure on cotton contracts came from southern hemisphere cotton crops in countries such as Brazil and Australia that are now being marketed by their growers.
Analysts were looking for clues on how open interest in the spot May cotton contract of over 5,000 lots as of Friday would be disposed of before expiration looming at the end of this week. Analysts said the severe drought in the top growing state of Texas is becoming an increasing source of concern for the market.
"The weather situation in Texas has not gotten any better for planting, as they continue to lack the rain needed. There is still time for the weather to turn around and dump the rain they need but it is time to start to take notice," a report by Louis Barbera of VIP Commodities said. Volume traded in the cotton market was at 13,852 lots as of April 29, ICE Futures US data showed.
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