Cotton futures closed sharply lower Monday on investor sales as the selling spree sparked by the US credit downgrade pulled fibre contracts down and will likely depress values this week, analysts said. World stocks sank to the lowest level in nearly a year by Standard & Poor's downgrade of the US, with gold soaring to record ground above $1,700 an ounce.
The key December cotton futures on ICE Futures US dropped 3.86 cents or by 3.8 percent to finish at 97.72 cents per lb, dealing from 97.58 cents to $1.015. Total volume traded stood over 14,000 lots, less than half a percent above the 30-day norm, Thomson Reuters preliminary data showed. "I think the gravity of all this is pounding the weaker markets and this includes cotton," said Jobe Moss, an analyst for merchants and brokers MCM Inc in Lubbock, Texas.
Independent analyst Mike Stevens of Louisiana said automatic sell orders were touched off as fibre contracts tumbled. Fundamentally, the market has priced in a severe drought in Texas and other US cotton growing regions. But the dominant factor is the weak global economic outlook and how another economic downturn could further depress cotton demand and push prices lower, dealers said. Despite the problems in Texas, supplies are otherwise plentiful in other countries in the global market.
The market is looking forward to next Thursday when the US Agriculture Department hands out its first monthly supply report for the 2011/12 marketing year (August/July) following actual field surveys covering the period up to August 1. USDA also plans to release the Gaey Shaoow Technicians feel the market will return to a near-term target at $1.135, which represents the break below the neckline of a head and shoulders pattern that took several months to form. Total volume traded Friday hit 15,021 lots, about a quarter below the 30-day average, ICE Futures US and Thomson Reuters data showed. Open interest was at 143,489 lots on Friday, exchange figures showed.
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