Cotton futures closed mixed on Monday as the market sought to recover after tumbling to a near two-year low last week although the outlook for fibre contracts remains bearish due to bumper supplies, analysts said. July cotton on the ICE Futures US exchange closed down 0.15 cent at 78.82 cents per lb, trading from 77.85 to 79.90 cents. It was an inside day since the range was within Friday's 77.16 to 81.76 cents band.
On Friday, the contract ended at 78.97 cents in the lowest close for the spot contract since July 2010, according to Thomson Reuters data. "The market is trying to consolidate in here," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana. "It's trying its beat to correct its oversold condition." Cotton futures are still oversold with a technical strength reading of 26. A reading of 30 or below normally means a market is oversold and one of 70 or higher meant it is overbought.
New-crop December added 0.36 cent to end at 76.70 cents, dealing from 75.40 to 77.40 cents. The contract also saw an inside day, with the range within Friday's 74.46 to 79.17 cents range. Fundamentally, cotton is in the grip of market bears especially after the US Agriculture Department's monthly crop report forecast world 2012/13 cotton ending stocks at a record 73.75 million (480-lb) bales, up over 10 percent from the 2011/12 level.
"The bear market is going to be with us for a long time," said Stevens, adding lower prices would need to cure the excessive production which was the result of cotton values surging to a record at $2.27 per lb in March 2011.
Cotton is now trading at levels last seen before that historic rally. That price, which topped even the price that cotton fetched during the US Civil War in the 19th century, spurred a sharp rise in plantings around the world. Volume on Friday was 44,888 lots, the highest since April 18. Open interest rose for the sixth session running and stood at 188,979 lots as of May 11, ICE Futures US exchange data showed.
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