US cotton futures finished near a three-month low Thursday on investor sales as a commodity-wide sell-off undermined a wide variety of markets and the weak tone could last into next week, analysts said. The Reuters-Jefferies CRB index, a global benchmark for commodities, was headed for its biggest loss in two years due to widespread liquidation.
The mauling suffered by commodities spilled into stocks and crude, with oil prices stumbling 6 percent as doubts over the health of global economies spread like a contagion. "It's an outside market beatdown," said Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas. "This is the undertow of all these outside markets pushing cotton down."
The key July cotton contract on ICE Futures US fell 4.65 cents to settle at $1.4686 per lb, trading from $1.4451 to $1.515. It was the lowest close for cotton in almost three months, Thomson Reuters data showed. The new-crop December cotton futures lost 3.51 cents to close at $1.2208 cents per lb.
Volume traded stood at almost 20,000 lots, about a fifth below the 30-day norm, Thomson Reuters preliminary data showed. Moss and other analysts said cotton prices, which rallied to an all-time peak in March 2011, has been weakened by demand destruction as consumers turned away from the fibre. "You're saddled with the problem of no business (being done)," said Moss.
His view seems borne out by the weekly export sales report of the US Agriculture Department, which showed US cotton sales at 74,600 running bales (RBs, 500-lbs each). Two months ago, weekly US cotton sales topped 500,000 RBs. Traders said investors have also soured on cotton, as the level of investor exposure in the market sank. Open interest in the cotton market dropped to 149,712 lots as of Wednesday, May 4, from 149,384 lots in the previous session, the lowest level since October 2009, data from ICE Futures US showed. Volume traded in the cotton market was at 10,679 lots as of May 4, versus the previous tally of 14,166 lots, exchange data reported.
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