US cotton remained under pressure on Tuesday, hitting fresh five-week lows on seasonal selling ahead of the Northern Hemisphere harvest. Falling for a fourth straight session, New York-traded cotton for December delivery settled down 0.17 cent, or 0.23 percent, at 72.33 cents per lb on ICE Futures US That was near the weakest reading for the day and held prices at lows last seen on August 15. "It's in the seasonal window and prices will decline in the harvest," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia.
Bearish sentiment as Northern Hemisphere farmers prepare to harvest crops offset any strength the market may garner from a weaker dollar, traders cautioned. "Cotton will test the June lows," said Brown. Prices sank to as low as 64 cents per lb at the start of June, which was its lowest level since October 2009.
While the short-term outlook remains bleak, some speculative traders have bought far forward on a bet that prices will recover by the 2013/14 marketing year as farmers grow less cotton in favour of higher-priced grains. They hope falling output will eat into the record surplus. Even so, the forward physical market remains extremely quiet, with traders complaining about sinking volumes.
December 2013 prices are above the nearby contract, but have also fallen the past four sessions. Prices settled at 77.08 cents per lb, also a five-week low, down 0.41 percent. Trading volume was extremely low with only 35 lots changing hands on the day. That compares with over 13,000 traded in the December 2012 contract.
Traders caution it may take more than a year of falling production to erode the excess supply washing around the market. The carryover at the end of the most-recent 2011/12 season was a record high, and the US Department of Agriculture has forecast stocks will hit another all-time high above 76 million bales for the marketing year to July next year.
Conditions are all the more challenging as the sluggish global economy stifles demand and textile mills use less natural fibre and more lower-priced manmade material after the wild price swings that roiled the market over the past few years. Cotton underperformed the broader commodity market on Tuesday, with the 19-commodity Thomson Reuters-Jefferies CRB index rising 0.25 percent as the euro recovered from one-week lows and oil rose. Prices have fallen every week for the past month and are down about 12 percent for the year-to-date. Even so, the market is on track to post gains for the third quarter. The small rise, just under 1.5 percent, comes after a 21-percent plunge in the second quarter. Friday is the last trading day of the quarter.