New York cotton falls for fourth session
Cotton fell for a fourth straight session on Monday, the longest string of daily losses in six months, as investors took more profits following a rally to one-year highs and the bull run fuelled by speculators showed signs of flagging. The most-active May cotton contract on ICE Futures US slid 0.7 cent, or 0.8 percent, to settle at 86.59 cents per pound. Cotton has closed down each of the past four sessions, the longest run of daily declines for the spot contract since late September.
Copyright Reuters, 2013
Prices had risen about 20 percent until the recent string of losses, driven as speculators boosted their bullish bets in ICE cotton contracts to a five-year high. Since, funds have been seen liquidating their long positions and taking profits. Open interest has fallen every session since March 15, when the spot contract surged to a one-year high of 93.93 cents a lb. The combination of falling prices and open interest has been seen as evidence that speculators have been unwinding their long positions for the time being.
"You didn't start to see a lot of the sizeable selling until mid-week (last week), and we continue to see that," said Knight Capital's cotton specialist Sharon Johnson. While government data showed on Friday that speculators had increased their net long position in cotton futures and options in the week ended March 19, prices have dropped nearly 5 percent from Tuesday's close. That indicates that much of the long liquidation would have occurred following the reporting period through March 19, Johnson said.
Trading volumes were light on Monday, at about 21,000 lots and about 12 percent lower than the 30-day average, preliminary Thomson Reuters data showed. Prices were pressured as mills hung to the sidelines and hesitated to buy into the falling market. Strong physical demand and a sense of tightening global supplies have underpinned futures prices in recent weeks, with US government shipment and sale levels have been seen as strong during that time, especially in the face of high prices. That trend has come despite a record global surplus forecast by the end of the 2012/13 crop year through July, as more than half is expected to become part of China's stockpiles and is considered unavailable to the global marketplace. Beijing began its stockpiling program in 2011, paying above global prices to support farmers.
But expectations that China will sell cotton from its strategic reserves has overhung the market. Prices fell almost 6 percent last week amid news that India and China, the world's largest producers, will both release cotton from government stockpiles. Cotton prices felt further weight from expectations that a USDA plantings report due Thursday will indicate that US growers may plant more cotton than initial forecasts indicated. Early estimates put next year's US crop at the smallest in 20 years, but growers are expected to boost their cotton plantings this year amid the recent rally.