Cotton futures tumbled on fund sales and end-of-the-month liquidation to settle on Friday near a three-month low and the poor tone may lead to further losses in the market over the coming sessions, brokers said. ICE Futures open-outcry March cotton contract slid 1.58 cents to end at 63.46 cents per lb, moving from 63 to 64.75 cents.
It was the lowest finish for the contract since early September. The rest lost from 0.03 cent to 3.55 cents. The ICE March electronic cotton contract dove 1.48 cents to 63.56 cents at 3:06 pm EST (2006 GMT), dealing from 62.97 to 65.04 cents. Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said the benchmark March contract may eventually take aim at a region around 62.50 cents in the weeks ahead.
She said the contract will "probably test" the lows in the March contract on Friday and a gap or area that runs to the 62.50 cents region. "The market likes (hitting and filling) those gaps," she said. "I suspect March may trade down to 61-62 (cents) over the next day/week or two which may push (the) Dec(ember) 2008 (cotton contract) down to just under 70 (cents) but then some recovery is likely," she said.
Cotton futures lost ground from the opening bell and once the March contract slid below 64 cents, automatic "sell" orders kicked in and accelerated the fall of the market. Johnson believes a short-term low is in place, but that further declines cannot be ruled out in the market.
"You have to eventually like cotton going forward since plantings next year would be even lower than this year's," a dealer said. US cotton plantings in 2007 reached an 18-year low of 11.01 million acres. Broker Flanagan Trading Corp sees resistance in the March open-outcry cotton contract at 63.70 and 64.55 cents, with support at 62.85 and 62.20 cents.
Open-outcry cotton volume Thursday was at 2,887 lots and screen trade at 7,937 lots. Open interest in the market fell 21 lots to 209,625 lots as of November 29, according to exchange data.