Cotton futures finished lower Monday due to trade and speculative sales, with analysts wondering if the market's recent rally is just about done. The New York Board of Trade's July contract slipped 0.47 cent to settle at 56.58 cents a lb, moving from 55.90 to 57.48 cents. Spot May shed 0.20 to 57.80 cents. Distant months declined from 0.30 to 0.57 cent. "The market's grappling over whether it should go higher," said Keith Brown of commodity trading firm Keith Brown and Co in Moultrie, Georgia. "It almost looks like it's sputtering for now."
Cotton had uncorked a searing rally after news Dunavant Enterprises had taken the lion's share of deliveries in the May contract and had decertified a large amount of stocks.
The analysts said Dunavant likely had booked sales of up to 500,000 (480-lb) bales of cotton and the likely destination is China.
After popping higher at the start, fibre contracts lost ground from speculative and options-related sales before recovering late on trade buying, dealers said.
"Cotton is starting to look a little toppy and we may need to pull back soon. I think we're going to see cotton break down if we cannot maintain ourselves up here," a dealer said.
The level of interest from China in the cotton market will also be subdued this week due to the week-long Labour Day holidays there. Stock and futures exchanges in the Asian giant will reopen for business on May 10.
A recent report by Sharon Johnson, cotton expert for Frank Schneider and Co Inc in Atlanta, Georgia, said the market may be following the spring rally pattern and cotton could "soon reverse" and a slow decline through summer may be seen.
Brokers Flanagan Trading Corp said it sees support in the July cotton contract at 56.15 and 55.50 cents, with resistance at 57.80 and 58.60 cents.
Floor dealers said estimated volume stood at 12,000 lots, versus the prior 7,807 lots. Open interest in the cotton market rose 585 lots to 121,159 contracts as of April 29.
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