Cotton futures settled softer Tuesday on speculative and option-related sales sparked by a rout in Chinese stocks which may depress the Asian giant's cotton imports, brokers said. "Everything is attached to China," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
Chinese stocks plunged nearly 10 percent and the fall spooked investors world-wide. Fiber contracts got hit because China is the world's biggest consumer of cotton.
Stevens said "the fear of recession" fuelled the sell-off in the cotton pit and the next move of the market will depend on whether the Chinese sell-off is a one-day move or whether it would mimic the meltdown during the Asian financial contagion in 1997/98.
In the open-outcry pit, New York Board of Trade's May cotton contract closed down 0.74 cent at 53.06 cents per lb after trading 52.70 to 53.40 cents. The back months declined from 0.32 to 0.90 cent. The IntercontinentalExchange's NYBOT electronic market for cotton showed the May contract down 0.80 cent at 53 cents at 2:33 pm EST (1933 GMT), dealing from 52.71 to 53.89 cents.
Cotton futures slid from the opening bell although modest amounts of trade buying prevented the market from falling more sharply, dealers said. Apart from China, the fundamental outlook for the market was dominated by the start of the spring planting season in countries like the US around April and May.
Traders will also be looking at the release of the annual planting intentions report for grains and cotton sowings from the US Agriculture Department on March 30.
Brokers Flanagan Trading Corp put resistance in May cotton at 53.30 and 53.75 cents, with support at 52.80 and 52.10 cents. Floor dealers said final estimated cotton volume in open-outcry stood at 15,000 lots, off from Monday's count of 16,920 contracts. NYBOT said electronic trading volume on Monday amounted to 3,763 lots. Electronic trading ends at 3:15 pm Open interest in the cotton market rose 1,262 lots to 200,802 lots as of February 26.