US cotton futures crumbled to a weak close on Tuesday as investors liquidated amid a broad sell-off in the commodity markets, and the bearish momentum could continue in the days ahead, analysts said. The key May cotton contract on ICE Futures US dove 4.85 cents to settle at $1.9973 per lb, trading from $1.976 to $2.0608. The new-crop December cotton contract declined 3.62 cents to close at $1.3556.
Total volume traded in the cotton market was around 30,500 lots, about a fifth above the 30-day norm, Thomson Reuters preliminary data showed. Goldman Sachs, a long-term commodity bull, sparked the selling spree when it warned that speculators had pushed crude oil prices ahead of fundamentals.
"This is a money break (caused by) aggravated uncertainty," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia. He said a nuclear emergency in Japan, unrest in Libya, and the Goldman announcement tilted sentiment in favour of market bears who then proceeded to dump commodities.
"It's poor (market) psychology," said Brown, adding the trading had nothing to do with cotton's fundamentals. The market will look for direction when President Barack Obama speaks Wednesday to lay out his approach in reducing the nation's debt. Open interest in the cotton market stood at 198,426 lots as of April 11, just shy of the two-month peak of 200,051 lots hit last week, which is the highest since February 10, data from ICE Futures US showed.
The market has already digested USDA's estimate of US cotton sowings and players are keeping an eye on the near drought conditions in the top growing area of Texas, which is expected to plant about half of the US cotton crop. Players took note of news that Monsanto's director of marketing for agriculture in the southern United States, David Rhylander, predicted that the USDA estimate of US cotton sowings of 12.566 million acres should increase given high cotton prices.