Cotton futures finished easier on Friday on speculative selling sparked by a bearish plantings report from the US Agriculture Department, but renewed investor buying due to tight nearby supplies quickly pared market losses, analysts said.
USDA forecast US 2012 cotton sowings at 13.155 million acres, higher than a Thomson Reuters survey's range of 12.74 million to 12.76 million acres. The number was below the forecast by industry group National Cotton Council which pegged plantings at 13.63 million acres. The benchmark May contract on ICE Futures US shed 0.02 cent to finish at 93.52 cents per lb, near the upper end of its 92.28 to 94 cents band.
New-crop December added 0.28 cent to finish at 91 cents, having recovered from a session low of 89.74 cents. The market is up across the board - in the first quarter of 2012, for the month of March and for the week. Cotton went up 1.87 percent from its end-fourth quarter finish of 91.80 cents, it increased 3.4 percent from the end-February close of 90.44 cents, and the market was up 4.35 percent from last week's close of 89.62 cents.
"The market overreacted this morning," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures. She said that while the USDA plantings figure was above trade expectations, the survey was done on March 1, and would not obviously be the final figure with spring still to unfold. At that time, the price of cotton was around 90 cents and grains such as soybeans was at $12 per bushel. Now, beans traded at a Friday session peak of $13.70 while cotton only traded up to but remained below 95 cents.
Analysts said that meant farmers in the US Delta states and the Southeast would likely shift to soybeans from cotton. In California, water restrictions could also force farmers out of cotton. "By the time we get to the next acreage report in June, cotton could be down 300,000, 400,000 (acres)," one said, adding the USDA number was only the opening number in spring planting season and would still evolve in the months ahead.
The USDA's annual planted acreage report is released June 30, which will set the stage for the upcoming 2012/13 marketing year (August/July). Open interest in the cotton market, an indicator of investor exposure in the market, fell for the fourth straight day to 188,368 lots as of March 29, ICE Futures US data showed. Last Friday, the open interest in the cotton market was at 190,909 lots, the highest since February 9, the exchange data showed.