Cotton futures in New York fell on Monday, snapping a two-session run-up, but the drop was mild compared to sharp selloffs in oil and other major commodities. With technical charts showing many commodities at or near overbought territory, traders dumped positions in key oil, metals and crop markets.
Weak regional US manufacturing data and worry that high prices may hurt demand contributed to the selling despite economic stimulus launched in the last two weeks by the Federal Reserve and European Central Bank. Cotton's benchmark December contract in New York settled down 0.57 cent, or 0.8 percent, at 75.33 cents per lb, moving between 76.77 and 75.12.
The decline was comparatively small to the fall of up to 3 percent in prices of crude oil. Trading in cotton was steady, with Thomson Reuters data showing volume in New York futures up about 8 percent versus the 30-day average. "I'm a bit surprised that cotton did not fall more today given the lack of positive news in the market," said Sharon Johnson, a cotton specialist at Knight Futures in Atlanta, Georgia.
Fundamentally, the outlook for cotton remained weak. Long-term concerns about waning demand and a record surplus have kept prices under 80 cents per lb since May. Last week, the US Department of Agriculture increased its estimate for the global cotton surplus to a record of 76.5 million 480-pound bales due in part to a drop in consumption and imports by China. The new forecast boosted by nearly 2 million bales last month's estimate - already the highest since USDA records began in 1960. A large carryover from last season was also a factor. December cotton was down in the first three sessions of last week, hitting a one-month low by Wednesday, after the USDA data.
It rebounded slightly on Thursday after US data revealed the country's biggest weekly export sales for cotton since June. On Friday, the contract rallied, trimming its loss for the week, after the Fed launched a $40-billion-per-month bond buying stimulus programme.
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