Cotton futures finished down and near a month low Thursday on speculative fund sales, and the market could grind lower on follow-through pressure before the weekend, analysts said. The New York Board of Trade's March cotton contract sank 2.92 cents to end at 43.86 cents a lb, dealing from 43.83 to 47.10 cents. It was the lowest close for the contract since 42.92 cents on December 27, 2004. May dove 2.86 to 45.07 cents and the rest slumped 1.58 to 2.90 cents.
"It was triggered by fund rolling and this pushed March into (automatic) sell stops. It started feeding on itself," said Mike Stevens of SFS Futures in Mandeville, Louisiana.
Fund rolling is a process by which investors who control large pools of money transfers their positions out of the spot contract and into the back months.
On a fundamental level, the market has to contend with record supplies of cotton although robust consumer demand has served to blunt the bearish impact of excessive fiber in the market.
Dealers said the demand could be gleaned from the weekly US Department of Agriculture export sales report.
The data showed US cotton sales at 285,300 running bales (RBs, 500-lbs each), near the top of trade expectations it would range from 200,000 to 300,000 RBs. US cotton shipments of previously booked orders stood at 263,500 RBs.
Once a probe of higher ground faded, the market stumbled as speculative fund liquidation took its toll on futures, brokers said. When key March fell below 46 cents, computer-generated automatic sell orders kicked into the ring, accelerating the decline, the dealers said.
The market will now be turning its attention to the annual survey by main industry group National Cotton Council of potential US cotton plantings in the 2005 season.
A survey by Reuters showed that US industry participants feel US cotton sowings will rise to an average of 14.2378 million acres, up from 13.76 million in 2004.
Brokers said initial support in March cotton would be at 43.50 cents, with resistance at 44 and 45.50 cents.
Floor traders said final estimated volume was a hefty 37,000 contracts, more than double Wednesday's count of 9,203 lots. Open interest rose 651 contracts to 98,920 lots as of January 26.