Cotton futures closed sharply lower Thursday on speculative liquidation and heavy switch trade from players getting out of the spot contract before deliveries get going next week.
New York Board of Trade's front July cotton contract dove 1.77 cents to finish at 49.12 cents per lb, moving from 49 to 50.90 cents.
The benchmark December contract sank 1.82 cents to 54.98 cents, dealing from 54.90 to 56.88 cents. Back months dropped from 1.38 to 2.10 cents.
"I would assume we would see more follow-through sales tomorrow," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta.
She said switch trade was also seen in the market as investors scrambled to get out of spot July since notices for the delivery period will be posted by next week.
Open interest in July fell 4,426 to 21,465 lots as of June 21 while interest in December rose 2,608 to 110,778 lots.
Fundamentally, the trade will be keeping an eye on weather conditions in the key growing state of Texas which is the top cotton producing area in the country.
Forecasters Meteorlogix said Texas will likely get scattered rain and the light showers may linger into Friday.
"Unless these rains increase in frequency and amount delivered they will only provide temporary relief to the cotton crop there," said a daily commentary of brokers Flanagan Trading Corp.
The cotton market got pounded from the opening bell by speculative and options-related sales before the now benchmark December cotton contract found support just under 55 cents. "We should certainly see an improvement in business," said Johnson, adding future direction of cotton prices will get clearer once deliveries in the July contract begin.
Meanwhile, USDA's weekly export sales report showed total US cotton sales at 223,000 running bales (RBs, 500-lbs each), up from last week's 115,500 RBs and trade belief it would range from 100,000-150,000 RBs.
US cotton shipments of previously booked orders reached 394,600 RBs, from 439,500 RBs last week and trade expectations it would reach from 400,000 to 450,000 RBs. Traders put support in the December contract at 55 cents, with resistance at 55 and 55.70 cents.
Floor dealers said estimated final volume came to 50,000 lots, up from Wednesday's count of 18,393 lots. Open interest fell 1,099 lots to 165,241 contracts as of June 21.