Cotton futures closed lower on Tuesday, pressured by a rise in the dollar, but prices held above the recent range low as many players were on hold for the long-awaited USDA report on planting intentions, traders said. Benchmark May cotton contract finished 0.89 cent lower at 79.54 cents a lb. It traded down to 79.37, its lowest since Friday, from a 81.12 cent high.
Volume in the May contract was a paltry 8,461 lots, with total cotton futures volume estimated at less than 11,000 lots by 3:30 pm EDT (1930 GMT). July cotton closed down 0.82 cent at 80.82 cents a lb. New-crop December lost 0.47 cent to end at 74.57. Early dollar strength tipped cotton prices lower after US data showed consumer confidence rose in March.
More importantly, expectations of a large increase in the US Department of Agriculture's annual cotton planting intentions report on Wednesday caused some players to position themselves for potential selling after the report. At 8:30 am EDT (1230 GMT), USDA releases its annual report on US cotton planting prospects for the 2010/2011 crop year.
In a survey conducted by Reuters on March 26, analysts projections came to an average 10.51 million potential acres (4.25 million hectares) planted for the new crop. Most analysts said they had two forecasts-one they believe USDA will report on Wednesday and another even higher estimate that should be closer to actual plantings.
Favourable weather conditions and firm prices have prevailed since USDA conducted its survey on March 1, leading analysts to think USDA may boost its result as well. "USDA has a history of not moving the numbers around too drastically. So, I don't anticipate any shocks. But we'll have to see," said Jurgens Bauer, softs commodity broker at www.pitguru.com. Bauer said he thinks the market has already priced in a result of 10.6 to 10.7 million intended acres of cotton plantings.
"If it's below 10.6 it should be bullish," he said. Activity has been somewhat lightened by a double holiday week. Both Passover and Easter occur this week, and the ICE exchange and cotton trading will be closed on Friday for the Good Friday holiday. Moreover, the quarter ends on Wednesday, which could stir up some price action. Since cotton has been trading in a wide sideways band, roughly between 79 and 83 cents on the May contract for several weeks, traders said a move could be in either direction.
"The quarter end could have some effect on prices, but probably not as much as the USDA's cotton number that's coming out. If that number is a surprise, it will supersede any adjustments for month-end and quarter-end," said Bauer. Monday's cotton volume fell to 11,641 lots from Friday's volume of 15,904 lots, according to ICE Futures US Open interest cotton rose to 186,746 lots on Monday from 185,839 lots on Friday, the exchange said.