US cotton futures closed the daily limit down on Monday due to light investor sales as players began positioning themselves before release of a key government plantings report this week, analysts said. The key May cotton contract on ICE Futures US dropped the 7-cents limit to end at $1.9749 per lb, with the session top at $2.04.
-- Market looks toward USDA plantings data on March 31
"You've just got people very wary of the plantings number," said Mike Stevens, an independent cotton analyst in Louisiana. Speculative and investment sales knocked the market down, but volumes were light. Total volume was around 15,000 lots, almost 50 percent below the 30-day norm, Thomson Reuters preliminary data showed. The level of investor interest in the market hit its highest level in almost 6 weeks as it stood at 181,017 lots as of March 25, the highest since February 17, ICE Futures US data showed.
Some dealers believe though that a large chunk of positions established in cotton were short positions as some investors expect cotton futures to decline in the weeks ahead with plantings of the fibre on the rise around the world. Traders said the market is already pointing to the release of the US Agriculture Department's annual potential plantings report on Thursday at 8:30 am EDT (1230 GMT).
A Thomson Reuters survey showed US cotton sowings are expected to reach a 5-year high of around 13.21 to 13.24 million acres, up almost 20 percent from the 11.04 million acres planted in 2010. The USDA report is the first government survey of likely plantings for major row crops in 2011. Despite the rally in cotton to record highs, the fibre has had to compete hard for acreage against similarly high-priced grains this year.
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