NEW YORK (Dow Jones)--Cotton prices slipped Tuesday as traders eyed uncertain
demand and strong incoming supplies.
Nearby cotton for October delivery settled 0.99 cent, or 1%, lower at 77.78
cents a pound on ICE Futures U.S. Most actively traded December cotton ended
0.61 cent, or 0.8%, lower at 73.01 cents a pound.
Cotton prices have fallen 4.5% since the start of July as traders factored in
expectations for a bumper crop in the U.S., up 50% from last year at 18.30
million 480-pound bales, according to data from the U.S. Department of
Agriculture. Near-ideal conditions for cotton development are fostering growth.
The U.S. cotton crop was rated 68% in good-to-excellent condition in the week
ended July 18, up from 66% the previous week, USDA data show.
At the same time, traders are uncertain about the demand that will meet the
glut of cotton coming to the market. A bumper crop is expected from India as
well.
The U.S. dollar Tuesday gained as traders avoided the euro ahead of the
Friday release of results from stress tests on European banks. Bearish U.S.
housing data also added strength to the dollar as signs of stalling U.S.
economic recovery damp risk appetite. Investors bought the safe-haven dollar,
which made cotton more expensive in other currencies. Sugar, coffee, corn and
cocoa also lost ground Tuesday.
With little fresh news expected to move the market ahead of the autumn
harvest, cotton could hold within its recent range and act on outside cues,
analysts said.
"Cotton's continuing to consolidate," said Sterling Smith, market analyst at
Country Hedging in St. Paul, Minn.
The contract has support at 73 cents and technical resistance at 75.10 cents,
Smith said.
"We're kind of price neutral," said Jack Scoville, vice president at Price
Futures Group in Chicago. "It seems like we may have peaked out a bit."
Speculative traders, such as banks and hedge funds, have recently moved into
a bearish position on the cotton market.
Speculators added 3,539 bearish short positions in ICE cotton futures and
options in the week ended July 16, the speculation and hedging report shows.
Specs also cut 3,088 bullish long positions to total 63,285 long lots. In
effect, specs moved to a 2.3% net short position in cotton from 1.9% net long
the week before.
ICE daily cotton stocks decreased by 5,154 500-pound bales Monday to total
97,900 with 1,346 decertification orders, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--increased by 2,658 positions Monday to total 158,683, according to
the exchange.
Volume was estimated at 17,799 lots. In options, approximately 2,341 calls
and 1,177 puts traded on the floor, according to exchange data.
Close Change Range
Oct 77.78 -0.99 77.78-79.29
Dec 73.01 -0.61 72.96-74.29
Mar 73.52 -1.09 73.51-75.27