NEW YORK (Dow Jones)--ICE Futures U.S. cotton settled lower Wednesday as a
six-session rally halted amid broad-based commodities weakness.
Most-active May cotton settled down 15 points, or 0.2%, at 76.11 cents a
pound. The contract rose 7.7% from Feb. 8 through Feb. 16. The rally was
jump-started by U.S. Department of Agriculture projections that growing world
cotton demand would spark more U.S. exports and draw down available domestic
stocks.
"Overall the market still looks bullish, but we could be in for some
consolidation," said Tom Mikulski, senior market strategist at Lind-Waldock in
Chicago.
After a late-2009 rally driven by tight supplies and growing demand, May
cotton prices fell 11.53% from early January through early February as
speculators bailed out of bullish positions. Analysts said prices had risen too
high to attract demand from cotton mills.
A Feb. 9 USDA report estimated world cotton production would fall 12.4% short
of demand in the August-July crop year, while adding another 9% to outlooks for
U.S. cotton exports. The change whittled available cotton stocks by 23.25% in
the U.S., the world's top cotton exporter. Demand from overseas mills had
surged as prices backed off early in the year.
Cotton prices may now move sideways as speculative traders test out a new
range, while textile mills wait on the sidelines for lower prices, said Sharon
Johnson, senior cotton analyst at First Capitol Group in Atlanta.
Speculative traders are moving back into long positions on supportive
fundamental outlooks and bullish technical chart formations, said Keith Brown,
principal of Keith Brown & Co. in Moultrie, Ga. Futures could push back toward
77.83, May cotton's 16-month high hit Jan. 4.
Speculative traders increased their net long position in ICE cotton to 5.5%
from 0.3% net long last week, ICE data show. Those traders, who have no use for
the underlying commodity, increased length by getting out of short positions,
or bets that prices would move lower.
May cotton could retreat to the 74-cent level before making a move higher,
Mikulski said.
Weekly U.S. cotton export sales data will be delayed one day and be released
Friday.
ICE daily cotton stocks increased by 4,065 500-pound bales Tuesday to total
491,494 bales with 26,029 bales awaiting review, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--increased by 2,242 positions Tuesday to total 163,991, according
to the exchange.
Volume was estimated 25,205 lots. In options, approximately 1,777 calls and
3,351 puts traded, according to exchange data.
Close Change Range
Mar 75.17 -17 pts 74.76-75.64
May 76.11 -15 pts 75.66-76.53
Dec 73.04 - 9 pts 72.51-73.50