Cotton futures fell by their daily limit on Friday, as investors fretted over Europe's debt crisis and players exited long positions in the December contract before first notice day next week, brokers said. "A lot of it's Europe, which had a lot of pressure on a lot of commodities today, cotton more so," said Sharon Johnson, senior cotton analyst at Penson Futures.
The spot December cotton contract on ICE Futures US slid by its daily limit for the second day in a row, declining 4.69 cents, or 4.71 percent, to end at 94.90 cents per lb. Its range spanned 94.77 cents - the lowest since August 9 - to $1.0015.
Now-most-active March cotton futures dropped 3.21 cents to close at 93.14 cents, a 3.33 percent decline, after trading between 93.12 and 97.74 cents per lb. Total volume traded on Friday rose to 25,263 lots, about 18 percent greater than the 30-day norm, according to preliminary Thomson Reuters data. Worries about the impact of Europe's debt problems on demand, not only in the euro zone, but also spill-over effects in the rest of the world pressured many commodities on Friday.
Euro zone officials said there had been discussions on having the European Central Bank and the International Monetary Fund bail out even the bigger economies in the region, but sentiment remained bearish. Investors who could not get out of December cotton futures also scrambled to exit long positions on Friday.
Open interest on December cotton futures came to 9,445 lots, ahead of the contract going into first notice day next Wednesday. "I think the longs who have stayed in and didn't get out yesterday were running for cover. Whatever it takes, get me out," Johnson said. A shaky demand outlook could be seen in news that industry publication Cotlook cut its forecast of world 2011/12 cotton consumption and raised its estimate of world 2011/12 cotton ending stocks.
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