US cotton futures were mixed by the end on Thursday, with nearby contracts falling and later-dated futures firming after steep selling in day-earlier business, but ample nearby supply was hurting May and July fibre prices. "We've had something of a meltdown in the market this week, but today it did a little better. It was, of course, oversold," said Keith Brown of Keith Brown and Co in Moultrie, Georgia.
Most-active July cotton on ICE Futures US finished 1.37 cents lower at $1.5202, a 0.89 percent decline, after falling to the downside limit a day-earlier. New-crop December cotton was up 1.98 cents, or 1.59 percent, at $1.2658 cents a lb. at the close.
May cotton, which is undergoing deliveries, was down 2.07 cents, or 1.18 percent, to end at $1.7282 per lb. Thursday began with open interest of 5,350 lots for the May contract, only a slight decline from the 5,674 lots open as of Tuesday. Yet, delivery notices issued to date have been light. Many players sold cotton as a preventative measure on Wednesday ahead of the US Federal Reserves policy-setting statement, in a move to take risk off the table.
When the Fed confirmed that it left its loose monetary policy intact for an extended period, many participants saw the sell-off as overdone and bought back cotton, along with many other commodities. "The selling was end-of-the month speculative liquidation, fear about what Bernanke might say yesterday, and today's export numbers showed some cancellations," said Brown.
Further, supplies coming to the market from the Southern Hemisphere-specifically, Brazil, Argentina and Australia-at competitive prices hurt July prices. But, cotton was able to regain strength in contracts dated from October out through the rest of the board as many participants rolled into new crop contracts.
"We continue to see old crop lose to new crop. We start planting (new crop) in earnest in May, but in many locations the crops are going to be put in some very dry dirt," said Brown, adding that some farmers are having to water their land well ahead of time just to prepare for planting. Texas, the US's largest producing state, has been hit by drought that could affect the crop due in December.
Weather experts said Thursday, the devastating drought intensified across Texas over the last week, with high winds and heat causing "massive crop losses," with little relief seen any time soon. At the other extreme, the worst floods since 1937 are expected to cause the Mississippi River to swell in about two weeks that should peak in Memphis. Further signs that the market is facing too much supply came with the US Department of Agriculture's weekly export sales data, showing about 43,900 cancellations and marking the fifth straight week of reduced sales.
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