US cotton futures finished the daily limit down on Tuesday on investor liquidation as the mill and speculative buying which powered the market to record highs dried up for the moment, analysts said. The key May cotton contract on ICE Futures US fell the 7.00-cent limit to finish at $2.0714 per lb, with the day's top at $2.1575. Lou Barbera, cotton analyst at brokerage house VIP Commodities, said the correction may take the May contract down to the region around $1.9725.
That would represent a 50 percent retracement of the rally, which took off on February 25 and hoisted cotton prices to all-time highs. "I think we continue down to the 50 percent (retracement) level and then we stabilise," said Barbera. Volume traded Tuesday though stood about 28,400 lots, over 10 percent below the 30-day norm, Thomson Reuters preliminary data showed.
But open interest in the cotton market did not seem to be matching the surge in prices to new record highs. Open interest in cotton stood at 175,640 lots as of March 7, up from the seven-month low at 174,074 lots hit on February 28, data from ICE Futures US showed. The market will be turning its attention to Thursday's release of the US Agriculture Department's monthly supply/demand report.
The main item the trade will monitor would be any changes in world 2010/11 cotton consumption since most major cotton producing countries are done with their harvests. After that, the focus of market players will turn to the vital USDA potential plantings report on March 31, the first government indication of likely plantings for major row crops like cotton, corn, soybeans and wheat in 2011.
Comments
Comments are closed for this article.