Cotton futures sagged from switch trade and speculative sales to end on Thursday at a four-month trough and the market could see further pressure from switch trade in the days ahead, brokers said. The New York Board of Trade's May cotton contract fell 0.70 cent to finish at 51.12 cents per lb, dealing from 52.05 to a new lifetime low of 51.10 cents.
Based on the spot daily charts, it was the lowest close for cotton since early December 2006. July slid 0.79 to 52.81 cents. The rest declined from 0.11 to 0.75 cent. The IntercontinentalExchange's NYBOT electronic market for cotton showed the May contract down 0.57 cent to 51.25 cents at 2:37 pm EDT (1837 GMT), moving from 52.06 to a new lifetime low of 51.10 cents.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said investors have probably liquidated almost 30,000 lots worth of contracts in the spot month the past three days. She said some fixation-type buying was seen at the market's lows, "but not enough to make a difference."
The heavy switching is a process where investors in the market move positions out of the spot month and into back contracts before the date when deliveries begin. Open interest in the May contract fell 8,864 lots to 62,983 lots as of April 11 while interest in July increased 8,563 to 87,255 contracts.
On a fundamental level, the focus of the trade is currently on spring growing conditions in the US cotton belt over the next few weeks. Separately, there was little reaction to the weekly export sales report from the US Agriculture Department although most analysts expect substantially bigger sales next week.
USDA said total US cotton sales hit 327,500 running bales (RBs, 500-lbs each), from 394,700 RBs in last week's report. US cotton shipments reached 286,900 RBs, against 317,700 RBs in the USDA report last week.
Broker Flanagan Trading Corp sees support in May cotton at 51.05 and 50.50 cents, with resistance at 51.55 and 52.10 cents. Floor dealers said estimated final volume stood at 70,000 lots, from the prior total volume of 52,145 contracts. NYBOT said electronic trading volume Wednesday was at 16,482 lots. Open interest in the cotton market was at 224,543 lots as of April 11, up 936 lots from the previous session.