US cotton futures settled lower on Friday on follow-through investor profit-taking and after No. 1 consumer China raised banks' reserve requirements which could cool growth and hit cotton demand, analysts said. The cotton market will be shut Monday to honour US civil rights leader Martin Luther King Jr. Trading reopens on Tuesday.
The key March cotton contract on ICE Futures US dropped 2.62 cents to settle at $1.4144 per lb, dealing from $1.4119 to $1.4595. or the week, the market gained 0.5 percent however. Volume amounted to 20,700 lots, about 12 percent above the 30-day norm, Thomson Reuters preliminary data showed. "You've just got profit-taking," said Sharon Johnson, senior cotton analyst for commodities brokerage Penson Futures in Atlanta.
She said the Chinese decision likely contributed to the weak tone of the market, especially since it may lead to lower demand for cotton in the Asian powerhouse which serves as an engine for the global economy. This was underscored by lower Chinese cotton prices, with the May cotton futures on the Zhengzhou Commodity Exchange last done at 28,670 yuan per tonne, down 225 yuan on the day.
Johnson said cotton futures will remain vulnerable from macroeconomic factors which may affect the ability of world economies to consume cotton. Analysts said that anticipated small increases in the level of cotton exports by India, which is allowing 5.5 million bales of cotton for export, could easily be offset by losses in Australia, where devastating floods have hit the country. In three weeks, the closely watched plantings survey by US industry group National Cotton Council will be released. A Reuters survey had pegged US 2011 cotton plantings around 12.4 million to 12.5 million acres, a 5-year high and up from last year's sowings of 11.04 million acres.
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