Cotton futures closed sharply lower on Friday on investor liquidation and profit-taking as players opted to take cash off the table after the market had rallied steadily the past few sessions, brokers said. The December cotton contract sank 2.87 cents to finish at 61.94 cents per lb, moving between 61.91 and 65.39 cents.
December contract volume reached 16,664 lots at 2:59 pm EDT (1859 GMT). March cotton fell 2.69 cents to end at 63.94 cents, dealing from 63.90 to 67.28 cents. Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said that once the December contract broke below 63.15 cents, it "set off an avalanche of selling."
A close below that level would likely lead to further losses going into next week. The move in December to near the recent high of 65.47 cents spawned "trade selling (which) was more than sufficient to absorb the buying, leaving the market vulnerable to a washout of those who paid too much for an end-of-the-week long position," according to Stevens. Analysts said that while cotton could slide early next week, the market may soon turn its focus to the upcoming US Agriculture Department monthly supply/demand report in October.
"Producers and other members of the trade should have a better 'feel' for yields by early next week once they can fully assess the cotton crop," said a report by Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia.
She added that No 1 consumer China "has also experienced wet and/or cold weather in the south-eastern portion of the country as well as the western province (of) Xinjiang, potentially lowering yields." Total cotton volume traded Thursday was at 8,408 lots, from the prior tally of 8,084 lots, ICE Futures US said. Open interest in the cotton market reached 147,918 lots as of September 24, from the previous count of 146,248 lots, the exchange said.