US cotton futures settled the daily limit down Tuesday as follow-through liquidation and switch trade deflated the market for the second consecutive session, analysts said. Some in the trade wondered if fears the US Agriculture Department's monthly supply/demand report on Thursday may show a reduction in US cotton exports which could have pressured fibre contracts as well, they said.
The benchmark December cotton futures on ICE Futures US fell the 7.00 cent limit to end at $1.2993 per lb, with the day's top at $1.3728. It is the biggest one-day move for cotton since March 8. Last Thursday, the December contract finished at $1.3923 per lb, the highest settlement for the third position cotton contract since May 3. In the span of less than a week's trade, the market has lost 6.7 percent in value.
Spot July cotton also dropped the 7.00 cents daily limit to end at $1.4863 per lb. "There's a little bit of a chill in the air," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia. He said there is concern whether cotton demand is flagging after the USDA's weekly export sales report last week showed cancellations of US cotton sales for the 10th straight week. "There is fear (over) demand," said Brown. "They may cut (US cotton) exports in this s/d report."
The trade is also keeping a close watch on the drought in Texas and an upcoming decision by farmers there whether they would persist in growing cotton or begin collecting insurance payments on their withered crops from June 20. Open interest in the cotton market was at 159,809 lots as of June 6, still within striking distance of the 161,193 lots in open interest on June 3, its highest level since April 20, the exchange data showed. Total volume traded Tuesday reached almost 25,100 lots, over 50 percent above the 30-day norm, Thomson Reuters preliminary data showed.