US cotton futures closed lower on Thursday, hitting their 5-cent downside limit at one point, after a government plantings estimate suggested the biggest US cotton crop in five years. The losses dragged fibre values down to close out the second quarter of 2011 with a more-than 40 percent loss. It was the first quarterly loss since the second quarter 2010, brought upon by end user demand destruction after prices mounted a historic rally above $2 per lb in the first quarter.
Benchmark December cotton futures on ICE Futures US shed 2.81 cents or 2.3 percent to settle at $1.1859 per lb, after dealing between $1.1640 and $1.23. The losses were triggered by an annual planted acreage report by the US Agriculture Department that pegged US 2011 cotton sowings at 13.725 million acres, the highest since 2006, when 15.274 million acres were sown to cotton.
The USDA plantings number came in at the higher end of Reuters poll, with the average analyst estimate at 13.26 million acres. "Plantings were on the high side at 13.7 (million acres), with most of it in Texas, but a lot of that is going to be cut in half," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures. "It's just a knee-jerk reaction ... we know they're going to have record-high abandonment this year."
Total market volumes picked up a bit from the sluggish pace at the beginning of the week, but still remained on the low side. More than 16,250 lots traded late in New York, about 20 percent below the 30-day norm, Thomson Reuters preliminary data showed. On the weather front, more extreme heat is in store for the US Southwest and Texas through Friday, forecaster Telvent DTN said in a daily comment. Open interest in the ICE futures cotton market stood at 137,261 lots as of June 29, up 1,277 lots from the previous session, ICE Futures US data showed.