US cotton futures settled lower Wednesday on investor profit-taking as the failure to extend the market's advance prompted players to liquidate positions in fibre contracts, analysts said. The key May cotton contract on ICE Futures US fell 4.09 cents to end at $2.0187 per lb, dealing between $2.0997 and $1.9896, which was down the 7-cent trading limit.
The volume stood at around 24,000 lots, about a fifth below the 30-day norm, Thomson Reuters preliminary data showed. Open interest in the market, an indicator of investment exposure, stood at 176,065 lots as of March 22, a level that is above an 8-month low, data from ICE Futures US showed.
"We reached the (topside) technical points and profit-taking set in," Mike Stevens, an independent analyst in Louisiana, said. Lou Barbera, a trader for brokerage VIP Commodities, said the market also faced some pressure from talk that some cotton sold to China may be coming back to the exchange after sales were cancelled and he also pointed to a buildup in certificated cotton stocks.
Traders said cotton pushed higher in an attempt to get past $2.10, basis May, where some automatic pre-placed computer buy orders were believed to be sitting, but the attempt petered out. "The whole thing just ran out of gas," one trader said. Next week, the US Agriculture Department will be releasing its closely watched annual potential plantings report on Thursday for crops such as cotton, corn, soybeans and wheat, among others.
The USDA report is the first government survey of likely plantings for major row crops in 2011. Despite the rally in cotton to record highs, the fibre has to compete for acreage against similarly high-priced grains this year. Analytical firm Informa Economics projected on Friday US farmers will plant 13.13 million acres to cotton, a level that would be the highest in 5 years.