NY cotton ends down in biggest 1-day loss in 3 weeks

"China canceled 200,000 ... it just continues to confirm that we are not selling any cotton," said Keith Brown of Keith Brown and Co. in Moultrie, Georgia.

The key December cotton contract on ICE Futures US fell 2.05 cents or 1.8 percent to finish at $1.1162 per lb, its largest daily decline since Aug. 25, when it shed 1.9 percent of its value.

The session range ran from $1.0942 to $1.1483.

Despite the negative tone, analysts such as Brown were surprised just how well cotton managed its losses given the greater liquidation pressures in its peer markets.

"By all rights we should have been limit down, particularly with corn, beans and wheat sharply lower," Brown said.

US grain and soybean futures tumbled sharply on active fund selling after crop-damaging frost concerns in the US Midwest eased and technical pressures mounted.

"The positive has to be that the (cotton) market came back today. There is a little bit of underlying demand."

In looking at that demand outlook, China will issue low-tariff import quotas of wheat, rice and corn as well as cotton for 2012, with volumes unchanged from 2011, the National Development and Reform Commission said Thursday.

Technical trading was also at play with the market's failure to penetrate key trend line and moving average resistance.

"Last week's high was $1.1547. If we can close over that then we will suddenly side-step the linebacker and we're in the secondary ... we'd be able to run from there," one cotton broker said.

Volume Wednesday increased to 14,239 lots from the previous session's count of 11,975 lots, ICE Futures US data showed.

Copyright Reuters, 2011