US cotton futures closed lower Wednesday on investor sales as most players finished adjusting positions before release of Thursday's government crop report, analysts said. The key May cotton contract on ICE Futures US fell 2.73 cents to finish at $2.0441 per lb, trading from $2.0248 to $2.134.
Open interest in cotton, an indicator of investment exposure in cotton, fell to near a 7-1/2 month low at 173,688 lots as of March 8, data from ICE Futures US showed. The US Agriculture Department will hand out its monthly supply/demand report on Thursday at 8:30 am EST (1330 GMT).
The main piece of information the trade will monitor would be any changes in world 2010/11 cotton consumption since most major cotton producing countries are done with their harvests. Weak consumption numbers would indicate the market is rationing demand after a rally that boosted values to all-time highs, said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia. Many in the trade expect the USDA to increase the estimate for world cotton consumption in 2010/11.
"The market has certainly dialed in a lot of bullish info," Brown said. Analysts said they will also look at the weekly USDA export sales data to give further guidance on cotton demand. More importantly though, the cotton industry will be turning its attention to the USDA's potential plantings report due out on March 31.
That is the first government indication of likely plantings for major row crops such as cotton, corn, soybeans and wheat in 2011. Despite the rally in cotton, the fibre has to compete for acreage against similarly high-priced grains this year. "The bigger number for cotton at this time is the acreage number," said Brown. Volume traded Wednesday stood about 31,200 lots, about even with the 30-day norm, Thomson Reuters preliminary data showed.