* Prices sink as risk appetite ebbs
* Investors lock in profits after recent rally
* U.S. crop conditions unchanged
* Mills sidelined after last week's price rally
NEW YORK, Oct 23 (Reuters) - U.S. cotton futures sank more
than 3.5 percent on Tuesday, their biggest one-day loss in over
two months, as investors either locked in profits from recent
gains or fled risky assets amid concerns about weak physical
demand.
Retracing ground it made last week, the most-actively traded
December cotton contract on ICE Futures U.S. settled at
74.27 cents per lb, down 3.4 percent, after falling to an
intraday low of 73.93 cents. Prices hit their highest level
since May last Thursday, just below 80 cents.
The pressure halved the inversion between December and the
March contract, which emerged last week, to 0.5 cent. The
March contract slipped 1.9 percent to 73.94 cents.
Selling helped to buoy volumes, with 27,096 lots changing
hands on the day, well above the 30- and 250-day averages.
After last week's 7-percent gains, the sell-off in fibers
was more pronounced than in the broader commodities market.
The Thomson Reuters-Jefferies CRB index, a global
benchmark for commodities, settled down 1.2 percent, near a
2-1/2-month low, with natural gas the only commodity among the
19 tracked by the CRB to show gains.
The euro was also under pressure, hitting a one-week low
against the dollar, as concerns about a global economic slowdown
returned to the fore.
Confidence was shaken by disappointing quarterly earnings
from global industrial companies, DuPont and United
Technologies, seen as barometers for global economic health.
Markets were also nervous as the U.S. Federal Reserve
started its regular two-day meeting, with Chairman Ben Bernanke
expected to main his accommodating monetary policy amid signs of
a slowdown in the world's largest economy.
NO DEMAND, NO STOCKS
Demand for cotton has evaporated after the rally in prices.
"Fundamentally, mills are sidelined as prices are
unacceptably high and merchants are unwilling to offer deep
enough discounts to stir interest," said Sharon Johnson, cotton
specialist at Knight Futures.
"Producers added to their sales last week, but are being
more circumspect about additional sales at current prices."
Even so, speculative investors and traders have added to
their bullish long positions and covered their shorts. Open
interest, the number of outstanding contracts, slipped 549 lots
to 207,329, but was still at highs last seen in February 2011,
shortly before prices topped out at $2.27 per lb.
Tentative signs of increasing stocks emerged with a rise of
352 480-lb bales in material pending USDA review overnight to
1,804 bales.
Traders were watching for more significant inflows of
material though as the U.S. harvest continues apace. As of
Sunday, some 38 percent of crops in 15 states had been
harvested, according to the U.S. Department of Agriculture's
weekly report.
That is on track with the five-year average of 39 percent
and up from 28 percent in the previous week. Crop conditions
were unchanged from the previous week, with 31 percent rated
"good" and 11 percent "excellent".
Some 98 bales of new certified stocks arrived but they were
mostly offset by a decertification of 85 bales, taking overall
stocks to 8,446 bales.
