Cotton futures settled lower Thursday on investor sales as the market fell for the third day in a row and analysts said the weak tone could lead to further losses. The key December cotton contract on ICE Futures US fell 2.00 cents to close at $1.0299 per lb, moving from $1.0174 to $1.0639.
Total volume traded hit over 15,200 lots, almost 15 percent above the 30-day norm, Reuters data said. "It (cotton) looks very shaky," said independent analyst Mike Stevens in Mandeville, Louisiana. Analysts said the December contract has endured a 50 percent retracement from its recent low around 93 cents to its recent peak at $1.09.
The large amount of net upland cotton sale reductions reported in the US Agriculture Department's weekly export sales report of 230,300 running bales (RBs, 500-lbs each) and weak US cotton consumption data put further pressure on the cotton market. "It doesn't look like we could get out of the hole it got into," said Stevens. A fall below $1 would open the door for another probe of lows hit around 93 and then December could go to 90 cents, dealers said.
They said the threat posed by Hurricane Irene to cotton crops in South Carolina and North Carolina does not appear to be severe and has largely been ignored in the cotton market. The US Agriculture Department's weekly crop progress report on Monday showed 22 percent of North Carolina's cotton bolls are open for the week ending August 21, and the figure for South Carolina is only 7 percent and 4 percent for Virginia.
Heavy rains falling on open cotton bolls would damage cotton quality, rendering the fibre almost unusable for mills. Since most of the cotton plants are still filling out and are not yet open, the rains may even help the crop develop in those states. A state like Georgia, the second biggest cotton grower in the country, could use the rains because it has been hounded by a severe dry spell.
The level of investor interest in the cotton market improved slightly to hit 146,598 lots as of August 24, over 6,000 lots above the 140,442 lots on August 11 which was then the lowest level in over two weeks, ICE Futures US data showed. Total volume traded Wednesday hit 15,308 lots, more than double the Tuesday level of 6,410 lots, which is the lowest level since June 25, 2010, ICE Futures US data showed.