Cotton futures finished a tame session with modest losses on Thursday, but brokers said they thought the slow day and consolidating prices were welcome after nearly two weeks of exceptionally volatile price moves.
"We did about 50,000 in volume yesterday and today was markedly less, simply because the market is consolidating and pondering its next move," said Keith Brown of Keith Brown and Co in Moultrie, Georgia. The ICE Futures' May cotton contract lost 1.25 cents to end at 80.81 cents a lb. Its range was a tight 80.52 to 83.15 a lb. The new-crop December cotton contract settled 1.16 cents lower at 88.53 cents per lb.
Cotton prices finally began to steady after two weeks of extraordinary fluctuations that led to the 4-cent daily trading limit and a 12-1/2-year peak at 92.86 cents a lb last week. "I think the cotton market is rather exhausted, because 8 out of the last 12 days have been limit moves," a broker said. On Thursday, prices gyrated around unchanged throughout the session without any major moves in light volume.
ICE data showed Wednesday's cotton volume totalled 50,962lots, but brokers said Thursday's count was much less. Open interest fell by 31,588 lots to 292,018 lots on Wednesday. The put options tally came to 45,690, with calls at 14,340 lots.
The weak export figures from the US Department of Agriculture pressured any attempts to the upside, but were not sold with any vigor. USDA reported net US cotton export sales at 42,600 running bales for upland, a marketing year low, that was down 56 percent from the previous week and 83 percent lower than the prior 4-week average.
"We had awful exports this morning and the supply/demand numbers (on Tuesday) were bearish. Yet, the market continues to be buoyed by a commodities psychology," said Brown, noting that gold rallied to $1,000 an ounce, crude oil rose to $111 a barrel, on Thursday and that grains were also strong at $14 for soybeans, near $6 for corn, and $13 for wheat. "So, in the mind of the speculator, 80 cent or 90 cent cotton, that's pretty cheap," he added.
Taking the record lows hit by the dollar against the euro, and dollar-denominated cotton becomes even cheaper for overseas buyers of the fibre. "The cotton market is caught in a conflict between its present day negative fundamentals and its hope for the future. The future is one that could bring us fewer acres in 2008, more demand to take care of this excess supply we have. And I think the market wants to hold on for that," said Brown.
Rising grain prices support a longer-term view of higher cotton prices because, as grain prices climb, farmers will be more likely to opt to plant wheat, corn and soybeans instead of cotton for next season's crop.