New York cotton extends losses, hits limit down for second day

US cotton touched its daily limit down for a second straight day on Thursday, as traders booked profit in one of the best performing commodities of 2010, before recovering some ground. China's Zhengzhou cotton futures also dropped as investors continued to liquidate positions ahead of the holiday season.
Investors are awaiting a decision by India to sell more cotton into the international market, a move that could pressure prices, analysts said. The key March cotton contract on ICE Futures US dropped 2 percent to 1.5096 per lb by 0643 GMT, after falling by 6-cent limit earlier in Asian trade. China's Zhengzhou cotton May contract fell to a low of 27,355 yuan per tonne.
"It is investor liquidation before the Christmas break and also profit-taking," said Ker Chung Yang, an analyst at Phillip Futures in Singapore. "We are also looking forward to exports data from the USDA tonight to see the export demand for cotton." India will decide whether to raise its export limit for cotton above 5.5 million bales for 2010/11 in mid-January, Trade Secretary Rahul Khullar said on Wednesday, and registration for current export quotas will reopen next week.
India, the world's second-biggest producer and exporter of cotton, had given permission for exports of 5.5 million bales in the 2010/11 cotton year that began on October 1, but had asked exporters to ship the entire quantity from November 1 to December 15. Exporters managed to ship only about 3 million bales by the deadline as unseasonal rains in October and November delayed arrivals of bales at domestic markets. Trade Minister Anand Sharma said on Tuesday India would allow exports in 2010/11 of the 2.5 million bales that exporters had failed to ship so far under the 5.5 million bales allowed.
"The news on India's sales of 2.5 million bales of cotton would boost world supplies and ease price rise, also providing a good opportunity for China to buy next year," said Yang Guoqi, an analyst with Jinshi Futures, in Xinjiang. China is expected to import more agricultural commodities in 2011 as the government covers shortages and replenishes stocks drawn down this year as the country grappled with soaring demand. The commerce minister offered no details on import targets, but stocks of corn, sugar and cotton were believed to be below one month's supply.