US cotton futures closed lower on Thursday mostly on spread trade and investor sales as players paid little heed to a pair of government reports, analysts said. The key May cotton contract on ICE Futures US fell 3.43 cents to finish at $2.0098 per lb, trading from $2.0038 to $2.0771.
"It looks like a lot of spreading going on," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana. Traders said most of the running seems to be dominated by investors who played the spreads or difference between contracts such as May and July, and July and December. "They would go in and out, in and out but not retain any position by the close of business," one said. The result is that estimated volume traded Thursday stood at about 16,000 lots, about 50 percent below the 30-day norm, Thomson Reuters preliminary data showed.
Open interest in the market, an indicator of investment exposure in cotton, stood at 175,133 lots as of March 9, recovering slightly from the 7-1/2 month low at 173,688 lots as of March 8, data from ICE Futures US showed. There was no discernible boost given to the cotton market by the reports from the US Agriculture Department which the trade believes should have had a bullish impact on fibre contracts.
The USDA's monthly supply/demand report cut world 2010/11 cotton ending stocks to 42.33 million (480-lb) bales from 42.81 million last month and raised world 2010/11 cotton consumption to 116.61 million bales against 116.55 million bales. USDA's weekly export sales data showed US cotton sales at 486,500 running bales (500-lbs each), much higher than trade expectations for 200,000 to 250,000 RBs.
Analysts said the bullish impact of the data was largely priced in as cotton rallied to record highs recently. Stevens said the next bit of information, which will provide direction for cotton would be the USDA's potential plantings data on March 31. That is the first government indication of likely plantings for major row crops like cotton, corn, soybeans and wheat in 2011. Despite the rally in cotton, the fibre has to compete for acreage against similarly high-priced grains this year.
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