Cotton futures closed lower Tuesday as traders factored in an expectation for
more acres to be planted in cotton during 2010 than a year ago.
Much of the selling was described as technical in nature after the recent
inability to get back through chart resistance.
May cotton futures, the nearby month which also has the most open positions,
settled down 0.89 cent, or 1.11%, at 79.54 cents per pound on ICE Futures U.S.
The July contract finished 0.82 cent, or 1.0%, lower at 80.82 cents.
"We saw liquidation going into tomorrow's prospective-plantings number," said
Boyd Cruel, senior softs analyst with Vision Financial Markets.
This is selling in which participants exit from positions they recently
bought. The immediate focus for the market is a report on U.S. cotton 2010
planting intentions scheduled for release Wednesday from the U.S. Department of
Agriculture. The average of analysts estimates for cotton plantings is 10.44
million acres, up 14% from the 9.15 million planted in the year before.
The larger acreage means potential for a bigger crop, and thus more supply,
assuming the weather cooperates.
"Obviously, whatever number is released tomorrow will dictate direction
tomorrow morning," Cruel said.
Mike Stevens, an independent cotton analyst, described the sell-off as
largely technical in nature.
The market seems to have put in a top around 83 cents, then subsequently
failed four times to break through here in the last 1 1/2 weeks. Meanwhile, it
recouped 50% of a recent break lower, then fell again in textbook fashion, he
said.
ICE daily cotton stocks increased by 2,923 500-pound bales Monday to total
786,464 bales, with 13,443 bales awaiting review, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--increased by 907 positions Monday to total 186,746, according to
exchange data.
Electronic volume as of 2:30 p.m. EDT (1830 GMT) Tuesday was estimated at
15,857 lots. In floor options trading, there were approximately 3,741 calls and
4,000 puts, according to exchange data.
Close Change Range
May 79.54c dn 0.89c 79.37-81.12
Jul 80.82c dn 0.82c 80.62-82.25
