Cotton futures crumbled from investor fund sales to finish sharply lower on Tuesday and fibre contracts may sink further on follow-through pressure in the days ahead, brokers said. The market was shut Monday for a holiday.
The benchmark July cotton contract sank 2.96 cents to end at 66.25 cents per lb, trading from 66.21 to 69.65 cents. It was the lowest close for cotton on a spot basis since late December.
The new-crop December cotton contract lost 3.00 cents to finish at the session low of 75.01 cents, with the day's high at 78.44 cents. "From a technical standpoint, it's a disaster," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
He said follow-through investment sales from the end of last week spilled into Tuesday's business. Combined with weakness in other commodity markets, the fall in fibre contracts accelerated in the close of trade.
Traders said the break should spur trade and consumer buying at the lows, but there appears to be no sign so far that that is taking place. "You could have a situation where those doing fixation buying may back off while they're waiting for prices to come off further," one said. Fundamentally, the market is keeping an eye on the developing crop in places like Texas, the area which may produce up to half of the cotton crop in the United States in the 2008/09 marketing year (August/July).
Forecasters DTN Meteorlogix said Texas should see some light showers through Wednesday, and then turn drier Thursday to Saturday. There was also some switch dealings being done as investors moved positions out of July and into the new-crop December cotton contract.
Analysts said market participants who use price points to make trading decisions pegged support in the July cotton contract at 66 cents with resistance around 67.50 cents. Volume traded Friday in the cotton market hit 29,928 lots, exchange data showed. Open interest in the cotton market fell 1,604 lots to 267,224 lots as of May 23, it said.