Cotton futures settled lower Thursday on investor sales as fears of a global recession were reasserted and analysts feel the market will struggle to make headway toward higher ground. The key December cotton contract lost 1.34 cents to close at 49.08 cents per lb, dealing from 48.81 to 50.75 cents. It was an inside day since the range was within Wednesday's 48.75-50.94 band.
March eased 0.19 cent to 53.32 cents. Volume traded in the December contract stood at 13,622 lots at 2:44 pm (1844 GMT). Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, said cotton futures were weighed down by a combination of weakness in world stocks, a marketing year low in US cotton export shipments and fear a recession may make an already tough business environment harder.
The US Agriculture Department's weekly export sales data showed US upland cotton export shipments at a marketing year low of 221,000 running bales (RBs, 500-lbs each). Brown said it is difficult to imagine how more cotton could be sold if the world's economies stumble in a prolonged recession.
Other analysts were more hopeful that the market has stabilised before the December contract low of 45.66 cents and despite the choppy dealings, may stabilise at or just below 50 cents. "What we are seeing is mill buying, mainly from China, below 50 cents.
But if a recession hits, those who are not confident believe we will be looking at more losses in cotton," a dealer said. Another factor going forward which could shore up cotton prices would be the fact that US plantings in 2009 may again decline as farmers opt to sow soybeans, corn or wheat because returns there are better.
Brokers Flanagan Trading Corp sees resistance in the December contract at 49.95 and 50.50 cents, with support at 48.60 and 47.40 cents. Volume traded in the cotton market Wednesday was 13,885 lots, exchange data showed. Open interest in the cotton market rose 896 lots to 170,048 contracts as of October 22, it said.