Cotton futures finished easier on Thursday on investor liquidation to scupper a rally fuelled by option-linked and investment fund buying in front of a holiday break, brokers said. The cotton market will be shut on Good Friday. Trading resumes Monday. The key May cotton contract dropped 0.31 cent to conclude at 48.41 cents per lb, dealing from 48.07 to 49.92 cents.
July eased 0.66 cent to end at 48.73 cents. Volume traded in the May contract was at 17,091 lots at 2:47 pm EDT (1847 GMT). Some analysts said a cotton market players may be short in the options ring and were forced to cover short positions, driving futures higher. That petered out near the close and the market tumbled as a result.
Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said the rally has already exceeded most expectations and is "probably close to the top of its range." There was little reaction to a pair of reports released by the US Agriculture Department.
The USDAs monthly supply data showed US 2008/09 cotton exports being raised to 12.5 million (480-lb) bales but world ending stocks in 2008/09 were upped to 63.43 million bales from 62.55 million bales. The weekly export sales report showed US cotton sales at 390,000 running bales (RBs, 500-lbs each), from 432,400 RBs in last weeks report.
US cotton export shipments stood at 290,600 RBs, versus 300,000 RBs in the government report last week. Brokers Flanagan Trading Corp sees resistance in the May contract at 49 and 50 cents, with support at 48.05 and 47.10 cents. Volume traded Wednesday reached 33,577 contracts, from the previous tally of 28,038 lots, exchange data showed. Open interest was at 136,138 lots as of April 8, from the prior tally of 139,492 lots, it said.