Cotton futures finished lower on Tuesday primarily on trade sales as the market pulled back after climbing in the previous session to its highest level in a month, brokers said. The New York Board of Trade's December cotton contract shed 0.77 cent to conclude at 55.18 cents per lb, dealing from 54.70 to 55.85 cents.
On Monday, the contract settled at 55.95 cents in its highest close since trading near 57 cents in late June. March fell 0.62 to 58.25 cents. The rest lost from 0.40 to 0.75 cent.
"Today is a day of rest," said Mike Stevens of brokers SFS Futures in Mandeville, Louisiana, adding fiber contracts were due to consolidate given the sharpness of the recent rally in the market. "It doesn't hurt the bull case at all."
Any retreat in cotton prices was also limited by the poor shape of the US cotton crop, which has been zapped by a searing drought. "The crop is in wretched shape in some places," Stevens said.
Most analysts feel the US 2006/07 cotton crop, which the government put at 20.5 million (480-lb) bales, will likely fall by at least 1.0 million bales when the US Agriculture Department releases its monthly supply/demand report on August 11.
In its weekly crop progress report on Monday, USDA said 32 percent of the US cotton crop is in poor to very poor shape, from 31 percent in poor to very poor condition last week.
Traders said that since the benchmark December cotton contract was able to hold above 54 cents, it should stabilise around its current level and then gradually push its way up over the next few sessions.
"You had some trade selling come in, but it looks like some of the specs are in the process of changing their positions in cotton," one said. Broker Flanagan Trading Corp sees resistance in the December contract at 55.50 and 56.25 cents, with support at 54.75 and 53.55 cents. Floor dealers said estimated final volume reached 9,000 lots, versus the previous 16,254 lots. Open interest in the cotton market fell 106 lots to 161,549 lots as of July 24.