Cotton futures settled easier Thursday on modest investor sales as participants tweaked their positions before release of a government crop report tomorrow, brokers said. The key December cotton contract fell 0.57 cent to close at 73.99 cents per lb, trading from 73.60 to 75.20 cents.
It is the lowest finish for the third position cotton contract since February 9, according to Thomson Reuters data. Volume traded in the December contract stood at 10,662 lots at 2:28 pm EDT (1828 GMT). "I think we're trading a higher crop number tomorrow," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia.
Analysts said the USDA may take a cautious tack and raise the estimate for US 2010/11 cotton production to around 17.3 to 17.5 million (480-lb) bales, from 16.7 million it forecast in last month's data. But the market seems to be dialing an even bigger number given near ideal growing weather across the US cotton belt and especially in Texas, which produces about half of all the cotton harvested in the United States.
A survey by Reuters of market participants showed they expect the US 2010/11 cotton crop reaching 17.968 million (480-lb) bales, up from the 12.19 million bales harvested in 2009/10.
Another focus of the market will be demand and whether the USDA revises higher its estimate of US cotton exports in the 2010/11 marketing year (August/July). Brokers Flanagan Trading Corp sees support in December at 73.30 and 72.25 cents, with resistance at 74.25 and 75.10 cents. Volume traded Wednesday reached 14,195 lots, from the prior tally of 16,669 lots, ICE Futures US data showed. Open interest in the No 2 cotton market was at 159,179 lots as of July 7, compared to the prior 159,524 lots, the exchange said.
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