* USDA projects US upland cotton plantings at 13 mln acres
* Rumors China will stop buying for strategic reserves
* Allenberg makes bulk of deliveries against March contracts
By Carole Vaporean
NEW YORK, Feb 23 (Reuters) - U.S. cotton prices fell
for a second day on Thursday in the benchmark May contract on
talk that China, the world's biggest buyer, may exit the market
for a while.
"There is more than enough cotton around the world right now
for the amount of cotton demand. So, there's no reason for these
prices to be so high," said John Flanagan of Flanagan Trading
Corp. in North Carolina, echoing other brokers.
Benchmark May futures on ICE Futures U.S. ended at
89.23 cents per lb, falling 1.30 cents or 1.44 percent. It moved
to its lowest level since Dec. 28 at 89.01 cents from a session
high at 91.15 cents a lb. May volume came to 13,958 lots in late
trade.
March cotton settled at 87.48 cents, down 1.09 cents,
or 1.23 percent. It was the lowest level since Dec. 27. The
range ran from 87.46 to 88.85 per lb.
Thursday was the contract's first day of deliveries.
"We had deliveries today and Allenberg was the deliverer.
So, not that many bales, but nonetheless when the world's
largest merchant is giving away cotton, that's not friendly,"
said Keith Brown of Keith Brown and Co. in Moultrie, Georgia.
"They should be acquiring cotton. That's what they do for a
living," he added.
Open interest left in March contracts as of Thursday came to
1,106, which brokers said amounts to about 110,000 bales of
cotton. There were approximately 130,000 of certified stocks,
meaning there was more demand for cotton than contracts
outstanding. They added, however, that there was plenty of
cotton available off the exchange in the cash market.
Brokers also said prices may have declined on talk that
China may exit the market.
"There was word out yesterday that China may begin to halt
or slowdown Reserve buying as of March 1," said
Analysts pointed out that on March 1 Chinese mills will need
an import license to bring cotton into the country. In order not
to compete with its domestic mills, the Strategic Reserve will
likely hold off buying to replenish stocks. Once mills have
their fill, China's Reserve may return to buy U.S. cotton.
"Still, the biggest buyer that we've had is going to keep
his hands in his pocket," he added.
Because of its clout as a large buyer in the global market,
China's absence could push prices down to much lower levels.
Some brokers said they think it is possible that China will wait
until prices move down into the 70s cents per lb before stepping
back in the market to buy any sizeable volume.
Elsewhere, USDA will report weekly export sales on Friday
because of the holiday shortened week.
Instead, the U.S. government released its forecasts for U.S.
crop prices, predicting they will retreat sharply this year as
world production and stocks expand after two years of heady
prices.
USDA further predicted that U.S. upland cotton plantings
should be 13 million acres, up by 1 million acres from previous
forecasts. Analysts said USDA's latest projections fell a bit
below the National Cotton Council's estimate at 13.6 million
acres released earlier this month, though NCC's annual forecast
includes all cotton, not just upland.
Open interest in cotton, an indicator of investor exposure,
declined by 2,015 lots to 170,422 lots as of Feb. 22 ICE Futures
U.S. data showed. On Wednesday, volume rose by 4,168 lots to
27,767 lots from Tuesday's count, exchange data showed.