Cotton prices fell Tuesday along with other commodities after weak Chinese
and U.S. economic data, with some position squaring occurring a day ahead of a
heavily anticipated U.S. Department of Agriculture report.
Nearby cotton for July delivery fell 0.81 cent, or 1%, to 83.68 cents per
pound on ICE Futures U.S. The December contract, which has the majority of the
open positions, lost 0.32 cent, or 0.4%, to 78.13 cents.
Equities and most commodities suffered after disappointing Chinese and U.S.
data. "That generally pulls down everything else, like cotton," said Rogers
Varner Jr., president of Varner Brothers Trading in Cleveland, Miss.
The Conference Board downwardly revised its leading economic indicator for
China to a gain of 0.3% for April, compared with the previously reported 1.7%
rise. China's Shanghai Composite Index fell 4.3%.
"Our market is inexorably attached at the hip to China," said Mike Stevens,
an independent cotton analyst in Mandeville, La.
China's economy has expanded in recent years, making it a large consumer of
commodities even when the U.S. was in a recession. Thus, any slowing of Chinese
growth is a concern for a number of commodity markets, including cotton.
Meanwhile, pessimism about the U.S. recovery emerged after the Conference
Board's U.S. consumer-confidence index fell to 52.9 in June from 62.7 in May.
"Plus, the December [contract] faced pressure due to some rain in the
mid-South," Varner said. "This area hadn't had any rain in about 2 1/2 weeks."
John Flanagan, president of Flanagan Trading Corp. in Fuquay-Varina, N.C.,
linked some of the weakness to speculators exiting positions or lightening
their exposure ahead of Wednesday's USDA report on the acreage planted in
cotton this year.
Cotton's decline accelerated when the market broke below key technical chart
levels that spurred additional selling. Stevens said for December cotton, that
was in the area around Monday's 77.67 low, which coincided with the 50-day
moving average of 77.69.
Flanagan said, "When cotton got down, then the serious buyers came in."
Specifically, he continued, cotton merchants used the price retreat to start
buying.
Stevens said that some traders who previously sold began buying to cover
their positions as prices stabilized around the lows.
Also, chart-based support emerged, he said, around a 50% retracement level.
The midpoint of a rally from the June low to the June high lies near 77 cents,
and the December futures held at 77.04.
Ahead of Wednesday's USDA report, the average expectation of analysts
surveyed by Dow Jones Newswires is for cotton plantings of 10.75 million acres.
That would be up from the 10.51 million estimated in a planting-intentions
report released in March.
ICE daily cotton stocks decreased by 36,904 500-pound bales Monday to total
426,342 bales, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 99 positions Monday to total 164,298, according to
exchange data.
Electronic volume as of 2:30 p.m. EDT (1830 GMT) Tuesday was estimated at
10,228 lots. In floor options trading, there were approximately 2,106 calls and
1,971 puts, according to exchange data.
Close Change Range
July 83.68c down 0.81c 83.05c-84.45c
Dec 78.13c down 0.32c 77.04c-78.58c