NEW YORK, Nov 7 (Reuters) - Cotton futures slid to a weak close Monday as index fund rolling put pressure on fiber contracts while another round of euro zone worries put financial markets on the defensive, dealers said.
The key December cotton contract on ICE Futures U.S. dropped 1.98 cents or by 2 percent to close at 96.76 cents per lb, moving from 96.51 to 98.96 cents.
Total volume traded Monday hit almost 25,700 lots, about two-thirds over the 30-day norm, preliminary Thomson Reuters data and ICE Futures U.S. data showed.
Analysts said funds, which follow the Goldman Sachs Commodity Index, were rolling positions out of several markets, including cotton.
"The Goldman fund is rolling and that's the biggie today," said independent cotton analyst Mike Stevens in Mandeville, Louisiana.
Investors kept a nervous watch on the latest developments in Europe. Global equities and the euro fell Monday as uncertainty in Italy fueled concern the euro zone's third biggest economy would be sucked deeper into the region's debt crisis, promoting investors to sell risky assets.
On a technical level, the fall in the December contract to a level under last week's low means the lower end of support could be challenged in the days ahead, traders said.
Stevens said in a report the "downside targets in cotton are ... the previous week's 96.47 low. The lower end of the Bollinger Bands is 95.78 (cents)."
Traders said they will be looking toward the release on Wednesday of the monthly supply/demand report of the U.S. Agriculture Department and wonder when the USDA will cut its estimate of U.S. cotton production to reflect drought damage in Texas, the biggest cotton growing state in the country.
"Many veteran observers have felt USDA was carrying the production estimate for most of West Texas unrealistically high all season.
However, working without district estimates for the first time, due to budget constraints, has put crop observers at a disadvantage," said Stevens. "Those district estimates for the high and low plains (in Texas) will not be available until the December USDA report so it could well be that report before USDA would consider any big cut in Texas production. But it is coming!" he added.
Open interest in cotton, usually taken as an indicator of investor exposure to that market, stood at 164,873 lots as of Nov. 4, exchange data showed. Total volume traded Friday in the cotton market reached 18,009 lots, ICE futures U.S. data reported.
