New York cotton settles down

Cotton futures ended lower Monday on speculative sales and switch trade as the reaction to a government production report was muted, brokers said.
The New York Board of Trade's May cotton contract fell 0.77 cent to finish at 53.20 cents a lb, in a band from 53.15 to 54.45 cents. July slumped 0.78 to 55.07 cents. The rest slid from 0.50 to 0.65 cent.
Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said the steadier close on Friday and encouraging numbers from the US Agriculture Department's monthly production report gave cotton an initial boost.
USDA raised its estimate for cotton imports in 2005/06 by top consumer China to 18.25 million (480-lb) bales from last month's estimate of 17.75 million and increased its consumption to 45.5 million bales from 45 million bales.
US cotton exports were raised to a record 17 million bales against 16.8 million. World consumption increased to 116.93 million bales from 116.15 million and world ending stocks were reduced to 52.91 million from 53.28 million.
But Stevens said the inability to hit automatic buy orders sitting at 54.50 cents, basis May, and higher "attracted speculative selling which in turn triggered trailing sell-stops taking prices near the lows posted last Wednesday where trade scale down buying became evident."
The market has been pinned in a band from 52.50 to 54.50 cents, basis the spot May contract.
"We've been in this range for three weeks and I don't see us getting out now," said Stevens.
Fundamentally, the trade is now monitoring growing conditions in the US cotton belt, especially the extended dry spell in large swathes of Texas and the south-western US Texas is the biggest cotton producing area in the country.
Analysts said they were also digesting news that China will buy 500,000 bales of US cotton.
"Even the most astute observers did not know how to differentiate between the ceremonious signing of agreements already in force and fresh previously unaccounted for business," Stevens said in a report.
Switch business was also done in the cotton pit as players moved positions out of the May contract before the delivery period begins on April 24.
Open interest in the May contract dove 5,391 lots to 64,868 lots as of April 7 while interest in the July contract climbed 6,350 to 48,817 lots.
Broker Flanagan Trading Corp sees resistance in the May cotton contract at 53.30 and 53.80 cents, with support at 52.75 and 52.10 cents.
Floor dealers said final trading volume was estimated at 28,000 lots, from the prior count of 35,028 lots. Open interest rose 2,302 lots to 140,961 contracts as of April 7.