US cotton futures finished near a three-week low Wednesday, dropping for the 6th time in seven sessions as investors exited positions after news Japan's nuclear emergency was getting worse. Europe's energy chief warned the situation at the earthquake-damaged plant was "out of control" and urged people to leave the country.
The key May cotton contract on ICE Futures US dropped 5.82 cents to close at $1.8512 per lb, trading from $1.8501 to $1.9794. It was the lowest close since February 25. Since hitting a record top at $2.27 last month, cotton has lost nearly a fifth of its value, Thomson Reuters data showed.
Open interest in the market, an indicator of investment exposure in cotton, stood at 174,801 lots as of March 15, compared with 172,588 lots in the previous session, which was the lowest since July 29, 2010, data from ICE Futures US showed. Volume traded stood at 27,500 lots, about 15 percent below the 30-day norm, Thomson Reuters preliminary data showed.
"It's pandemonium (selling) over Japan," said Keith Brown, the president of commodity firm Keith Brown and Co in Moultrie, Georgia. He said a vacuum of news over what is happening in Japan's nuclear reactors was filled in by the European declaration and this prompted already skittish investors to dump cotton late.
"The markets hate uncertainty and that uncertainty always breeds selling," said Brown. Analysts have said the damage of the killer quake and tsunami to an economy as large as Japan's will eventually hit cotton demand and change the market's underlying fundamentals. The next bit of information which will provide direction for cotton futures would be the potential plantings report by the US Agriculture Department due out on March 31. That is the first government survey of likely plantings for major row crops like cotton, corn, soybeans and wheat in 2011. Despite the rally in cotton, the fibre has to compete for acreage against similarly high-priced grains this year.
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