Cotton futures closed softer Wednesday on mostly speculative sales as the trade awaited release of a pair of government reports that could provide direction on the market's next move, brokers said.
The New York Board of Trade's July cotton contract lost 0.69 cent to end at 50.44 cents a lb, near the bottom of its 50.30 to 51.05 cents band. New-crop December fell 0.56 to 54.89 cents. The rest shed 0.30 to 0.58 cent.
Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas, said trade sales of the spread combined with speculative pressure to gradually erode values in the market.
Some trade buying emerged at the lows but dealings were distinctly modest as the market again faltered when it briefly probed the area over 51 cents, basis the July contract.
Analysts said the market may well take its cue from a pair of reports by the US Agriculture Department due out on Thursday and Friday. The first would be the weekly export sales report and the next is the monthly supply/demand report.
Brokers said they expect total US cotton sales to range from 150,000 to 250,000 running bales (RBs, 500-lbs each), versus sales in last week's report of 283,400 RBs.
They expect US cotton shipments of previously booked orders to reach between 400,000 and 450,000 RBs, compared to shipments last week of 416,200 RBs.
The market will also be looking closely at the release of the USDA's monthly supply report, which will contain its first look at production and demand for the upcoming 2006/07 marketing year (August/July).
"I think the report has the potential to catch everyone off-guard," Mike Stevens of brokers SFS Futures in Mandeville, Louisiana, said in an interview.
He said the USDA estimate on China's production and imports will draw close attention, especially after the USDA attache pegged Chinese cotton imports in 2006/07 at a record 4.1 million tonnes or roughly 18.8 million (480-lb) bales.
In 2005/06, USDA forecast Chinese cotton imports at a record 18.25 million bales. Attache reports are not official USDA data.
Brokers Flanagan Trading Corp put support in the July cotton contract at 50.10 and 49.60 cents, with resistance at 50.80 and 51.60 cents. Floor dealers said final trading volume was estimated at 13,000 lots, from the prior count of 10,553 lots. Open interest rose 1,593 lots to 154,475 contracts as of May 9.