Cotton futures finished lower Friday on speculative fund sales sparked in part by a bearish government crop report, and the poor tone may lead to further losses next week, brokers said.
The New York Board of Trade's December cotton contract dropped 1.12 cents to end at 55.74 cents per lb, dealing between 55.35 and 56.60 cents. March fell 0.86 to 58.83 cents. One contract aside, the rest lost 0.75 cent or 1.05 cents.
The market lost ground after the US Agriculture Department's monthly supply/demand report raised its estimate for world 2006/07 cotton output to 115.59 million (480-lb) bales from 114.36 million last month, trimmed global consumption to 121.69 million from 121.75 million and upped ending stocks to 48.29 million from 47.45 million bales.
US cotton production was reduced to 20.43 million bales from last month's 20.50 million and exports were cut to 16.2 million bales from 16.6 million in the July data, it said.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said the data provided players with a reason for futures to slow down and pull back after rising steadily recently.
"We've had a loss of momentum the last few days," she said, adding cotton could see further declines going into next week.
Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said the market ran into "extremely good trade buying" at the lows.
"The market performance so far is good enough that fund and potential managed money selling is standing back," he said.
Several analysts feel the estimate on the US cotton crop will have to be adjusted lower because of a severe drought, which has zapped cotton farms, especially in the top growing area of Texas.
Brokers Flanagan Trading Corp sees resistance in the December contract at 56.25 and 56.70 cents, with support at 55.50 and 54.75 cents. Floor sources said final estimated trading volume reached 13,500 lots, from the previous 14,891 lots. Open interest in the cotton market rose 204 lots to 163,779 lots as of August 10.