Cotton futures lost nearly 2 percent of their value on Friday, hit by a bearish government crop report that pointed to a weakening trend in global fibre demand. "The bearish influence from the report came from their failure to raise exports and in the world numbers," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
The US Agriculture Department (USDA) forecast US 2011/12 cotton exports at 11.3 million (480-lb bales), unchanged from its November estimate. US 2011/12 cotton production fell to 15.83 million bales compared with 16.3 million in its November supply data. Key March cotton futures tumbled 1.62 cents or 1.8 percent to finish at 90.43 cents per lb, after dealing between 90.15 and 92.75 cents.
"With this kind of report, not only should we be limit down, we should be lock limit down," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures. "But the volume is light. There are some macro events that are lending some stability." Global stocks rebounded and the euro rose against the dollar after nearly all European Union leaders agreed to build a closer fiscal union to address the region's debilitating debt crisis.
"If we lived in a bubble and it was just the USDA numbers, and we had the specs in there and the volume that we have had in recent months, I think we would be limit down," Johnson said. Volume was a paltry 10,800 lots in late Friday business, down more than half the 30-day norm, according to preliminary Thomson Reuters data. Open interest in the cotton market, usually taken as an indicator of investor exposure in the market, grew to 141,311 lots on Thursday, from the prior session's 140,708 lots, exchange data showed. Volume traded Thursday slowed to 7,682 lots from the prior day's 9,344 lots, ICE Futures US data reported.