NEW YORK: Cotton futures fell on Wednesday, stemming a two-session rally of more than 6.5 percent, as fiber came under pressure from a slowdown in buying, technical resistance and declining global financial markets, dealers said.
The most-active July cotton contract on ICE Futures US fell 1.04 cents, or 1.2 percent, to settle at 83.52 cents per lb.
Prices were seen correcting as the rapid pace of mill buying slowed after prices posted their steepest two-day rally since October at the start of the week, dealers said.
Spot prices spiked after a drop to below 80 cents on Friday prompted a flurry of buying and increased a sense of tightening supplies outside China, which is forecast to hold more than half of global stocks by the end of the July.
"We obviously put in quite a performance in the last couple days. The market got a bit overheated as we saw some position adjustment from both the trade and the speculators," said Chris Kramedjian, a risk management consultant for INTL FCStone, pointing to the previous sessions' heavy buying.
Fiber met technical resistance as gains pushed prices to around 86 cents, dealers said.
Falling world equities markets added pressure as investors moved to safe havens on concerns over global economic health. Weak economic growth could translate to a slowdown in consumer spending for products including apparel.
Certified stocks climbed to 520,675 bales on Tuesday, according to ICE data, the highest level since June 2010.
Still, cotton bulls said concerns remained over tightening supplies as the pace of US exports has remained steady late into the 2012/13 crop year which ends July 31.
Global demand for cotton has been strong, particularly in China where domestic prices are high. The country began a stockpiling program in 2011, paying above global prices to support its farmers.
A continuation of the program has resulted in steady demand from the world's top textile market.
Dealers eyed US weekly government export data due on Thursday, which is expected to be strong as the reporting period will include sales made during last week's price slide, though not Friday's drop below 80 cents.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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