Cotton futures closed down their 5-cent limit Friday, hit by a massive wave of investor liquidation in the December/March spread which kept fibre values pinned at 9-month lows. It was the sixth straight weekly loss for cotton and the biggest single weekly decline since December 2008, as demand repercussions from the market's brief historic spike above the $2 per lb level in May continued to unfold, leading the market lower in search of its fair value.
The key December cotton futures on ICE Futures US plummeted to its 5-cent downside limit, to end at 99.46 cents per lb. The session high was $1.0345 per lb. It was the lowest close for the second-position contract since early October 2010, Thomson Reuters data showed. "Today's break in cotton is related to only one thing ... the collapse of the December-March spread," said Mike Stevens, and independent cotton analyst in Louisiana.
Certificated cotton stocks deliverable against the ICE No. 2 cotton futures contract as of July 14, totalled 51,261 (480-lb) bales, up from 44,477 the previous session. Open interest in the December contract fell by 1,234 lots as of July 15, while interest in March eased 450 lots. Total market volumes picked up as the sell-off took hold on Friday, with 26,700 lots traded at 3:11 pm EDT (1911 GMT), more than a third above the 30-day norm, Thomson Reuters preliminary data showed.
In global markets, India has extended the last date for registration to export an additional 1 million cotton bales to July 22 from July 15, an official notification said on Friday. Aside from the spread business, traders were still monitoring weather and growing conditions in Texas, questioning how much of the US cotton crop would be harvested in the fall. Telvent DTN forecast Texas will remain dry through the weekend, with temperatures above normal. Open interest fell about 2,000 lots to 135,977 lots as of July 14, ICE Futures US data showed. Volume traded on Thursday slowed to 12,903 lots.
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