Cotton futures closed lower Monday in reaction to weather conditions
favorable to the U.S. crop so far.
Moves in outside markets, such as weaker crude oil, plus some traders still
factoring in a government report on planted acreage, also contributed to the
pressure.
Nearby cotton for July delivery fell 0.23 cent, or 0.3%, to settle at 84.49
cents per pound on ICE Futures U.S. The December contract, which has the
majority of the open positions, lost 0.46 cent, or 0.6%, to 78.45.
"We had a lot of rain across the southern U.S.," said Sharon Johnson, senior
cotton analyst with First Capitol Group in Atlanta. "Weather over the next two
weeks in the U.S. looks very good. It's hot, but we're going to get rain, and
it's perfect growing weather for cotton."
This means potential for a larger crop, which in turn tends to pressure any
agricultural commodity.
Mike Stevens, independent cotton analyst in Mandeville, La., also cited
weather as a factor pressuring cotton, in addition to expectations for the U.S.
Department of Agriculture to report that the acreage planted in the country
will be higher than initially projected back in March.
"It's widely accepted that there will be an increase in acres from the March
intentions," Stevens said. "And the growing conditions have been the best in
anyone's memory."
The average expectation of analysts surveyed by Dow Jones Newswires is for
the cotton planted area to be 10.75 million acres. This would be up from the
10.51 million estimated in a planting-intentions report in March.
The range of estimates was 10.51 million to 11 million.
"If it comes out 10.5 [million] or less, I think that is a little friendly,"
said Keith Brown, principal with Keith Brown & Co. in Moultrie, Ga. "If it
comes out closer to 11 million, that could be a little bit negative."
Outside markets also played a role in cotton's slide, Johnson said. She cited
weaker crude oil, a bellwether commodity that often leads other markets lower,
plus a stronger dollar that make commodities more expensive in other currencies
and thus can hurt demand.
Crude fell as fears that a developing tropical storm would disrupt Gulf of
Mexico output eased. The dollar rose against the euro since banks must repay
EUR442 billion in one-year funds to the European Central Bank Thursday, and
there are worries about a liquidity shortfall.
ICE cotton open interest-the number of active positions left at the end of
the session-increased by 499 positions Friday to total 164,397, according to
exchange data.
Electronic volume as of 2:30 p.m. EDT (1830 GMT) day was estimated at 11,260
lots. In floor options trading, there were approximately 1,087 calls and 1,369
puts, according to exchange data.
Close Change Range
July 84.49c dn 0.23c 84.41c-84.94c
December 78.45c dn 0.46c 77.67c-79.30c