New York cotton futures plummet

Cotton futures settled sharply lower Friday on investor sales and switch trade as players got out of the spot contract before it goes into delivery next week, brokers said. The July cotton contract sank 2.31 cents to end at 51.56 cents per lb, dealing from 51.53 to 53.83 cents.
It was an inside day since the range was within Thursday's 51.48 to 54.50 cents band. Volume traded in the July contract was at 3,386 lots at 2:35 pm EDT (1835 GMT). The new-crop December cotton contract fell 2.76 cents to settle at 56.38 cents, moving from 56.23 to 59.24 cents.
Mike Stevens, an analyst for SFS Futures in Mandeville, Louisiana, said the inability of the July cotton contract to get past the Thursday top of 54.50 cents quickly put pressure on fibre contracts. "The market failed to test yesterday's high and that made (cotton) vulnerable," he said, adding automatic sell orders dragged the market lower late in the session.
Trades in the July/December spread also nudged cotton down as investors liquidated their holdings in the July contract before it goes into first notice on Wednesday. Open interest in the July contract is down 3,783 lots to 8,681 contracts as of June 18. By Friday's close, open interest could be down to 5,000 contracts or less.
Analysts believe that at the rate positions are being disposed of in July, total deliveries at first notice could range from 1,000 to 2,000 lots. For now, analysts said cotton may trade in a band until deliveries are posted and the USDA releases its report. The trade will be waiting for the release on June 30 of the US Agriculture Department's annual planted acreage report.
The only factors that could inject volatility into the cotton market would be instability in world stock, grains and crude markets, they said. Wild swings in the dollar would also impact cotton. Brokers Flanagan Trading Corp sees support in the July cotton contract at 51.10 and 50.30 cents, with resistance at 52 and 52.75 cents.
Total volume traded Thursday reached 16,141 lots, versus the previous tally of 17,961 contracts, exchange data showed. Open interest in the cotton market was at 112,947 lots as of June 18, from the previous count of 114,540 contracts, ICE Futures US said.