Cotton futures settled on Tuesday at a fresh four-week low on modest speculative sales as the market's moves were dictated on the whole by plunging prices in the grains complex, traders said. ICE Futures' open-outcry March cotton contract eased 0.14 cent to conclude at 67.02 cents per lb, trading between 66.65 and 67.50 cents.
It was an inside day since the range was within Monday's 66.40 to 68 cents band. But based on the spot daily closing charts, it was the lowest finish for cotton since early January. May cotton shed 0.21 to 68.80 cents. The new-crop December cotton contract lost the same to 75.56 cents.
The March electronic cotton contract fell 0.31 cent to 66.85 cents at 2:53 pm EST (1953 GMT), dealing from 66.63 to 67.55 cents. "We're down in sympathy with grains," said Frank Weathersby, an analyst for brokers Affinity Trading in Fort Walton Beach, Florida.
But the gyrations were not as sharp as cotton investors seem to be taking in stride the limit moves seen in the grains complex. "We don't go up as much and we don't go down as much," said Weathersby, adding the tone of business is very quiet.
Grains prices are having a huge influence over cotton futures because prices there would determine if American cotton farmers would switch to grains and plant less of the fibre.
The market has digested the news from industry group National Cotton Council of America that its survey showed US farmers planning to sow 9.5 million acres of cotton in 2008. Most analysts now believe that figure, which would be a 25-year low, is still too high especially with soybean prices running at over $13 a bushel and wheat at more than $10 a bushel.
Traders said the new crop December cotton contract would need to rally to 90 cents or even $1 a lb to convince farmers to plant cotton. Brokers Flanagan Trading Corp sees resistance in the March open-outcry cotton contract at 67.75 and 68.60 cents, with support at 66.50 and 65.80 cents.
Open-outcry volume Monday was at 9,873 lots and screen business was at 59,023 lots. Open interest in the cotton market fell 7,688 lots to 270,963 lots as of February 11, exchange data showed.