Cotton futures crumbled from investment fund sales to settle lower on Monday and the market may edge lower on follow-through pressure this week, brokers said. The key March cotton contract fell 2.65 cents or by 5.37 percent to finish at 46.67 cents per lb, trading between 46.58 and 49.98 cents. Volume traded in the March contract was at 13,156 lots at 2:44 p.m. EST (1944 GMT).
The May contract retreated 2.48 cents to conclude at 47.37 cents. "The market was very, very vulnerable to a correction," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana. In a report, Stevens and other brokers said the market had already reached the top end of its technical targets and once the March contract slipped below 48 and 47.80 cents, automatic sell orders kicked in.
Stevens believes cotton prices should probe the region near 46 cents. "I look for major support at 46 (cents)," he said. Traders said the market also faced some pressure from the monthly supply/demand report of the US Agriculture Department. USDA further reduced its estimate for world 2008/09 cotton consumption at 115.24 million (480-lb) bales, from 116.59 million last month.
World 2008/09 cotton ending stocks were raised to 59.4 million bales from 58.77 million. In a sign of further weakness in demand, USDA reduced China's 2008/09 cotton imports to 7.5 million bales from 9.0 million bales. "I feel we are getting pretty close to the bottom for consumption," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia.
Brokers Flanagan Trading Corp said it sees support at 46.25 cents, with resistance pegged at 47.65 and 48 cents. Volume traded Friday reached 12,055 lots, exchange data showed. Open interest in the cotton market was at 129,391 lots as of January 9, from 130,378 lots in the previous session, it said.