NEW YORK (Dow Jones)--ICE Futures U.S. cotton ground down to seven-week lows
Thursday as a shift in China's economic policy sparked pressure that tripped
bearish technical chart points.

March cotton settled down 66 points at 72.89 cents a pound, off of the 72.56
low, and the May contract also settled 66 points lower at 74.07.

March cotton has lost over 4% since hitting a 16-month high Monday on the
weaker dollar. Futures dropped back Thursday as China raised its yield on
three-month bills in a move that analysts said signaled the country's banks
should avoid excessive lending in 2010.

"The big news that was pressuring cotton as well as other agricultural
commodities was talk that China was going to tighten its monetary policy a
little bit," said Joe Carney, analyst at Harvest Marketing Group, a brokerage
in Memphis.

China is the leading importer of U.S. cotton and textiles producer. Tighter
credit would make it more difficult for mills to purchase cotton to spin into
textiles.

"Tightening of credit policies in China is worrying people and rippling into
commodities in general," says Mike Stevens, independent cotton analyst and
broker.

However, some analysts said the move in commodities was psychological and
China's policy shift would not actually affect demand.

Nonetheless, late selling pushed March futures past key technical support at
73 cents a pound. Speculative fund traders, who have no use for the underlying
commodity, use technical charts to plot market trends.

Carney said the cotton futures were due for a correction. The March contract
has underlying support at 70 cents, but may not fall that far as traders look
to cover short positions and buy new longs ahead of the January U.S. Department
of Agriculture crop production and supply and demand report Tuesday, he said.

Analysts said they expect massive flows of money from annual index fund
rebalancing to move the market in coming sessions, though none are certain in
which direction.

ICE daily cotton stocks increased by 1,216 500-pound bales Wednesday to total
419,063 bales with 22,817 bales awaiting review, according to exchange data.

ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 1,143 positions Wednesday to total 185,756, according
to the exchange.

Volume was estimated 14,052 lots. In options, approximately 3,825 calls and
2,657 puts traded, according to exchange data.

Close Change Range
Mar 72.89 -66 pts 72.56-74.12
May 74.07 -66 pts 73.80-74.93
Dec 74.52 -34 pts 74.27-74.68