US cotton futures closed sharply lower on Friday on profit-taking and end-of-the-week liquidation as players cashed in their gains after the market hit new record highs this week, analysts said. Stumbling grains prices and fears the unrest in Egypt may lead to macroeconomic weakness also weighed on fibre contracts, they said. The key March cotton contract on ICE Futures US fell 4.64 cents to finish at $1.6475 per lb, trading from $1.6451 to $1.711.
Total volume stood around 23,700 lots, about a quarter above the 30-day norm, Thomson Reuters preliminary data showed. "It's end-of-the-week liquidation to be sure," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia. But cotton's weakness is also due in part to worries the Egyptian crisis "could be a contagion and start spreading" to affect the macroeconomic outlook of financial markets, Brown said.
With that in mind, traders said many investors opted to cash in whatever gains they have rung up in cotton futures to see what happens in Egypt this weekend. Cotton futures had risen over 22 percent in a fresh rally that began in the middle of January, inspired by strong cotton prices in top consumer China and partly on tight deliverable stocks of cotton on the ICE Futures US exchange.
The rally made cotton the early leader of commodities in the Reuters-Jefferies commodity index in 2011, as it rose 13.8 percent year to date. In 2010, cotton was the best performing commodity as it went up over 90 percent. The market also saw selling on the spread, or difference, between the spot contract and back months.
Next week, analysts said the market may turn quiet in part because players from No 1 cotton producer and consumer China will be taking off to celebrate the Lunar New Year. The key September cotton futures on the Zhengzhou Commodity Exchange was last done at 32,230 yuan per tonne, down 100 yuan on the day.
The market's attention would also turn toward a report on potential US 2011 cotton plantings. That forecast will be released on February 4 by industry group the National Cotton Council of America at its annual meeting in San Antonio, Texas. A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings from 12.48 million to 12.53 million acres, a five-year high and an increase of around 15 percent from last year's cotton sowings of 11.04 million acres.