Cotton futures fell as speculators sold to exit positions and book profits
Friday, with catalysts including weakness in equities plus general market
nervousness about holding riskier assets such as commodities after the
government accused Goldman Sachs of subprime fraud.
Nearby May cotton settled down 0.49 cent, or 0.61%, at 80.01 cents per pound
on ICE Futures U.S. The July contract, which has the most open positions,
finished 0.53 cent, or 0.65%, lower at 81.59 cents.
Cotton started the day stronger, with one analyst citing expectations for
good demand for U.S. product, particularly after news this week that India is
imposing a tariff on its cotton exports. July cotton hit a 1 1/2-week high of
82.81 cents a day after they also benefited from speculative buying after
strong Chinese gross-domestic-product data.
However, the tone changed around mid-morning.
"Basically, we had some people just taking some profits after the run-up we
had yesterday," said Sid Love, analyst at Kropf & Love Consulting. "We'll have
to start looking ahead toward the growing season and see how things go. That
will be the next thing to watch for."
The July contract eventually fell back as far as 80.64 cents, its weakest
level since Tuesday. The low was hit after news that the Securities and
Exchange Commission charged Goldman Sachs with defrauding investors by
misstating and omitting key facts about a financial product tied to subprime
mortgages.
"The breaking news concerning charges being filed against Goldman Sachs has
shaken up virtually all markets, including cotton," said independent cotton
analyst Mike Stevens. "Since buying in cotton this week has been primarily
speculative, it was quite vulnerable to the sympathetic selling and sell stops
were triggered. This being Friday, the market was vulnerable to profit-taking
anyway, particularly following the phenomenal rains in West Texas."
Cotton followed other markets, such as equities, crude oil and copper, said
Rogers Varner Jr., president of Varner Brothers. Commodities often look to
equities for indications of how the economy might be faring, and thus demand
prospects.
Around the time the cotton market closed, the Dow Jones Industrial Average
was down by around 98 points. The Continuous Commodity Index was around 4
points lower, with gold falling more than $20 an ounce and crude by more than
$2 a barrel.
Like others, Varner described the market as ripe for pre-weekend
profit-taking after running up more than two full pennies from the lows early
in the week, Varner added.
ICE daily cotton stocks increased by 12,835 500-pound bales Thursday to total
899,337 bales, with 65,571 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 1,969 positions Thursday to total 189,917, according
to exchange data.
Electronic volume as of 2:30 p.m. EDT (1830 GMT) Friday was estimated at
25,328 lots. In floor options trading, there were approximately 2,823 calls and
3,583 puts, according to exchange data.
Close Change Range
May 80.01c dn 0.49c 79.04c-81.26c
July 81.59 dn 0.53c 80.64c-82.81c