By Julie Wernau

Cotton prices continued to fall Monday following government data that showed hedge funds and other money managers are continuing to place short positions in the market.

Cotton for May delivery dropped 1.8% to end at 56.50 cents a pound on the ICE Futures U.S. exchange, the lowest close since June 23, 2009.

As of Tuesday, hedge funds and other managers betting on lower prices outweighed the bulls by 4,832 contracts, according to CFTC data.

The Rose Report said in a note Monday that cotton futures could move significantly lower.

Many buyers remain sidelined as they wait to see what China's policy will be for unloading its vast stockpiles of cotton, Plexus Cotton said in a note. The firm said they think specs have already loaded up on short positions and that odds favor a rebound.

"This event has for the most part been 'discounted' by the market and once the announcement is made, we might actually get a 'sell the rumor -- buy the fact' reaction," the firm noted.

In other markets, Arabica coffee for May dropped 0.1% to close at $1.1505 a pound, cocoa for May rose 2.3% to close at $2,955 a ton, raw sugar futures rose 2.6% to end at 14.36 cents a pound and frozen concentrated orange juice futures for May dropped 1.5% to end at $1.266 a pound.