NEW YORK, July 15 (Reuters) - Cotton futures closed down their 5-cent
limit Friday, hit by a massive wave of investor liquidation in the
December/March spread which kept fiber values pinned at 9-month lows.
It was the sixth straight weekly loss for cotton and the biggest single
weekly decline since December 2008, as demand repercussions from the
market's brief historic spike above the $2 per lb level in May continued to
unfold, leading the market lower in search of its fair value.
The key December cotton futures on ICE Futures U.S. plummeted to
its 5-cent downside limit, to end at 99.46 cents per lb. The session high
was $1.0345 per lb.
It was the lowest close for the second-position contract since early
October 2010, Thomson Reuters data showed.
'Today's break in cotton is related to only one thing ... the collapse
of the Dec/March spread,' said Mike Stevens, and independent cotton analyst
in Louisiana.
'Many traders had accumulated long Dec/short March positions because of
the shrinking deliverable supplies. Today appears to be stop-the-pain,
get-me-out type trading.'
Certificated cotton stocks deliverable against the ICE No. 2 cotton
futures contract as of July 14, totaled 51,261 (480-lb) bales, up from
44,477 the previous session.
Open interest in the December contract fell by 1,234 lots as of July
15, while interest in March eased 450 lots.
Total market volumes picked up as the sell-off took hold on Friday,
with 26,700 lots traded at 3:11 p.m. EDT (1911 GMT), more than a third
above the 30-day norm, Thomson Reuters preliminary data showed.
In global markets, India has extended the last date for registration to
export an additional 1 million cotton bales to July 22 from July 15, an
official notification said on Friday.
Aside from the spread business, traders were still monitoring weather
and growing conditions in Texas, questioning how much of the U.S. cotton
crop would be harvested in the fall.
Telvent DTN forecast Texas will remain dry through the weekend, with
temperatures above normal.
Open interest fell about 2,000 lots to 135,977 lots as of July 14, ICE
Futures U.S. data showed. Volume traded on Thursday slowed to 12,903 lots.
