New York cotton ends lower amid selling, USDA data eyed

NYCE cotton futures closed with moderate losses on Tuesday as trade and local selling pressured prices as players awaited the USDA's first forecasts on the 2004 crop year due on Wednesday, traders said.
"It was a disappointing day, not so much that we dipped, but because of how easily it broke down," said Mike Stevens, a cotton analysts with Swiss Financial Services in Louisiana.
The US Department of Agriculture will release its first estimates for the 2004/05-cotton crop on Wednesday, at 8:30 am EDT (1230 GMT).
Analysts said they look for a healthy, though not unusually large, crop outlook from USDA, but they think it will be inflated by an overly optimistic plantings assumption. "No doubt there was some book squaring before the report," Stevens added.
Active July cotton fell 0.39 cent to end at 64.15 cents a lb, after trading in a 62.40-to-64.70-cents range, failing to touch the six-week highs hit on Monday. Next-most-active December cotton slipped 0.12 cent to finish at 63.12 cents.
The back months were down 0.35 to 0.75 cent at the close. Traders said a combination of speculators; small funds, locals and some options traders bought cotton at the open. But heavy trade and local selling brought prices down quickly when support from speculators failed to materialise once the selling began.
Heading into the close, Stevens said trade scale-down buying, local short covering, and some spec buying kept prices above 64.00 cents a lb on the July contract.
He noted that the options-related selling was more locals adjusting hedged positions in the futures ring, "and had nothing to do with people putting in option orders." On the technical side, chartists said cotton's easy slide down into July's gap of last on Friday's session, starting at 62.60 cents, scared some buyers out of the day's action.
They said it illustrated the lack of support on the downside, with trade having to chase prices down. Technical analysts put resistance at 64.64, then 64.75 and 65.10 cents a lb. for July cotton futures.
Support was pegged at 63.75, then 63.61 cents. NYCE estimated volume at 8,906 contracts in futures, down from Monday's total of 13,536.
Calls were estimated at 2,005 and puts were at 2,828. Open interest as of Monday was down 1,065 lots at 81,714 contracts. The NYCE is a subsidiary of the New York Board of Trade.