New York cotton settles lower

Cotton futures closed lower Monday on trade sales and speculative profit-taking as the market took a breather after surging to a nine-month high at the end of last week, analysts said. The New York Board of Trade's key May contract fell 0.54 cent to finish at 53.11 cents a lb, ranging from 51.80 to 53.20 cents. July declined 0.48 to 54.43 cents. Distant months shed 0.10 to 0.38 cent.
"This is a correction in a bull market," Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, said, adding the downturn in cotton may just be a "respite" before fibre contracts come charging back.
Cotton had recently embarked on a rally due to strong demand for cotton and the seemingly inexhaustible appetite of funds to keep buying commodity products across the board.
Brown said part of the break in cotton on Monday was also caused by a fall in the Reuters CRB commodity index, but that has been mitigated somewhat by strong crude and even sugar prices.
Futures tumbled at the start on speculative fund and trade sales before finding support at the lows and paring losses on short-covering in the market, dealers said.
"The large open interest that currently exists (in cotton) will probably become the norm and price corrections are likely to be brutally sharp but short-lived," said a daily commentary by brokerage Flanagan Trading Corp.
Open interest in the cotton market went up 2,331 contracts to 122,269 lots as of March 11.
Traders said most funds are concentrating more on the ability of their long positions to make money rather than paying attention to an item like open interest.
"I think they are looking constantly at their charts to see if they can make more money and not really paying too much attention to open interest," one said.
Flanagan Trading said resistance in the May contract was at 53.65 and 54 cents, with support at 52.50 and 51.70 cents.
Floor traders said final volume hit about 16,500 contracts, up from the previous 13,708 lots. Open interest in the cotton market went up 2,331 contracts to 122,269 lots as of March 11.