New York cotton sharply lower

US cotton prices finished sharply lower on Wednesday, driven down by demand worries evoked by weak economic data in Europe and China that cast a shadow on global growth prospects. Once the selling got underway, stop-loss sell orders were triggered, compelling speculative players to add to their short positions and exit long positions.
"Part of this sell-off is from the outside markets, and then we started hitting a lot of sell stops, and specs were adding to shorts and getting out of longs," said Sharon Johnson, senior cotton analyst at Penson Futures in Atlanta. New benchmark May futures on ICE Futures US ended at 90.53 per lb, a 2.44 cent and 2.62 percent drop. It moved to its lowest level since December 29 at 90.45 from 93.45.
May volume jumped 18,276 lots shortly after the exchange session finished. March cotton also plummeted, settling at 88.57 cents, down 2.68 cents, or 2.94 percent, per lb. It was the lowest close since December 27. The range ran from 88.50 to 91.65 per lb. Volume was 5,356 in late business, a light tally ahead of the delivery period which begins on Thursday.
Data showing tepid European business activity worried investors in many markets, including cotton, about heightened prospects of slow growth or recession in the euro zone. Euro zone data showing shrinking services and manufacturing sector activity tempered optimism after a deal was reached in the previous session to bail out Greece.
It also followed a contraction in China's manufacturing sector in February for the fourth straight month, as new export orders dropped sharply. Following a sharp sell-off two weeks ago, cotton had found buyers in the export market at levels below 92 cents. In the current session, however, Jobe Moss of MCM Inc in Lubbock, Texas noted that prices, "Went through there like a hot knife through butter."
He added that worries about demand for the fibre have been prevalent ever since the US Department of Agriculture issued its last supply and demand report, in which it lowered its estimates for this year's world demand outlook. "I really think the world supply/demand that came out on the last crop report finally hit the perma-bulls in the face. We've now had six months of declining demand," he said. Open interest in cotton, an indicator of investor exposure, declined by 6,229 lots to 172,437 lots as of February 21 ICE Futures US data showed. On Tuesday, volume fell by 564 lots to 23,599 lots from Friday's count, exchange data showed.