Cotton futures settled slightly lower Tuesday on investor sales as the trade mulled whether a further advance in fibre contracts in the weeks ahead was feasible or not, brokers said. The December cotton contract slipped 0.19 cent to settle at 67.45 cents per lb, trading from 66.80 to 68.31 cents. December contract volume reached 9,670 lots at 2:38 pm EST (1938 GMT).
March cotton shed 0.27 cent to close at 70.82 cents, trading between 70.32 and 71.68 cents. Despite the pressure, fund buy-backs at the market's lows pared its losses, dealers said. "The funds believe in cotton's prospects, (especially) if other commodities are going higher," said Frank Weathersby, an analyst for brokers Affinity Trading in Fort Walton Beach, Florida.
Market bulls believe speculative fund accounts will pile into cotton because they feel fibre contracts are "undervalued," Gary Raines, chief economist at FC Stone Fibers & Textiles, told Reuters in an interview. He pointed to the nearly 74 percent rise in open interest in the cotton market since the second quarter of 2009 as it now stands at 188,235 lots as of November 2.
But market bears believe there are more than enough supplies in the market and high prices would drive potential buyers to the sidelines. "Just look at current export data and the impact of high prices is obvious," said Sharon Johnson, cotton expert at First Capitol Group in Atlanta, Georgia.
US cotton export sales have been weak for weeks, according to the US Agriculture Department's weekly export sales report. Sales of US upland cotton since the middle of September have remained below 100,000 running bales (RBs, 500-lbs each), reaching a nadir of 31,000 RBs for 2009/10 in the report of October 22.
Brokers Flanagan Trading Corp put resistance in December delivery at 67.50 and 68.40 cents, with support at 66.65 and 65.65 cents. Total cotton volume traded Monday hit 28,068 lots, off from the previous tally of 29,595 lots, ICE Futures US said. Open interest stood at 188,235 lots as of November 2 versus the prior count of 187,299 lots, according to the exchange.
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