NEW YORK (Dow Jones)--Cotton prices on Tuesday slid to their lowest levels
since mid-February as ideal growing conditions for the next harvest met ideas
that immediate demand may be momentarily satisfied.
Nearby cotton for July delivery settled 0.98 cent, or 1%, lower at 79.07
cents a pound on ICE Futures U.S. It was the lowest settlement for a
most-active cotton contract since Feb. 18.
Expectations that demand will outpace supply in the current season, as well
as next year, rallied cotton prices to two-year highs in late April. But now
demand may be relaxing. Futures hit those highs following an export ban from
India, the No. 2 cotton producer and exporter. Some exports are now being
allowed from the country. But cotton mills and merchants may have covered their
needs for the near term.
"A lot of this emergency buying has been satisfied," said Sharon Johnson,
senior cotton analyst at First Capitol Group in Atlanta.
Traders continued to roll out of the July contract, which represents
available supplies, and into December. However, some speculative funds may have
opted not to keep their position in the market given current fundamentals,
Johnson said.
Data released Tuesday that showed China's economy was expanding at a slower
pace than before dealt cotton a blow, said Keith Brown, principal of Keith
Brown & Co. in Moultrie, Ga.
China is the world's leading producer of cotton, as well as the top importer
of the fiber and No. 1 textile producer. The U.S. is the world's top cotton
exporter, and the majority of it ends up in China.
In addition, analysts noted that near-ideal conditions for the coming 2010-11
U.S. cotton harvest, represented by the December contract, are pressuring that
contract due to the possibility of greater supplies.
"The market is anticipating that the crop is going to look pretty good in
condition data today," Brown said.
The U.S. Department of Agriculture is scheduled to release weekly
planting-progress data at 4 p.m. EDT.
Despite easing fundamentals, analysts noted that cotton futures are likely to
encounter some buying from textile mills at these relatively low price levels.
ICE daily cotton stocks increased by 443 500-pound bales Friday to total
1.072 million, with 31,968 bales awaiting review and 2,464 decertification
orders, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 2,867 positions Friday to total 189,901, according to
the exchange.
Volume was estimated 31,097 lots. In options, approximately 1,465 calls and
3,945 puts traded on the floor, according to exchange data.
Close Change Range
Jly 79.07 -0.98 79.01-80.33
Oct 77.12 -0.94 77.10-78.05
Dec 77.61 -1.00 77.47-78.61
