Cotton futures ended sharply lower Friday on speculative fund sales and the market is seen dropping more next week on the back of follow-through pressure in fibre contracts, analysts said. The key March cotton contract on the New York Board of Trade sank 1.20 cents to finish at 42.42 cents a lb, dealing between 42 and 43.70 cents. Spot December slid 2.15 to 45.25 cents. Losses in back months ranged from 0.30 to 0.70 cent.
"It's mostly locals running stops," said Frank Weathersby of brokers Affinity Trading in Fort Walton Beach, Florida. "We could test 40 cents soon."
Analysts said speculative sales will remain a constant in the market, especially with bearish fundamentals in cotton stemming from a record US harvest and large crops in places like China, the world's biggest consumer of cotton.
Once the key March contract dropped below key support at 43.10 cents, automatic sell orders kicked in to accelerate the fall in cotton, they said. Trade support then pared the market's losses.
Cotton marketing analyst O.A. Cleveland said the 2004/05 season will again be dependent on China.
He said that "as long as China remains the world's primary importer of cotton, New York (cotton) futures will find price support in the low to mid-40s (cents)."
According to the US Department of Agriculture's monthly production report last month, China is seen consuming 36 million (480-lb) bales of cotton, versus production of 29.5 million bales.
Cleveland said China is on a path to consumer 38 million bales and this "could easily reach 40 million" in the 2005/06 marketing year (August/July).
Brokers Flanagan Trading Corp. pegged resistance in the March cotton contract at 42.85 and 43.40 cents, with support at 42.10 and 41.50 cents.
Floor dealers said estimated final volume stood at 15,000 lots, up from Thursday's count of 3,803 lots. Open interest rose 79 lots to 82,120 lots as of December 2.