Cotton futures finished at a 1-1/2 month low Thursday on investment fund liquidation sparked by worries over US economic growth and a slowdown as the manufacturing sector contracts in No 1 consumer China, brokers said. World stocks and commodities dove as weak data from China crystallised investor fears of a global recession.
"You've got a meltdown in all these other markets," said independent analyst Mike Stevens of Mandeville, Louisiana. "It's all attached to the Fed (action on stimulus) and China." The key December cotton contract on ICE Futures US dropped 3.54 cents or 3.4 percent to end at 99.29 cents a lb, trading from 99.07 cents to $1.0283. It was the first time since August 11 when the second position cotton contract closed under the psychological $1 per lb mark.
Total volume traded on Thursday hit over 20,600 lots, almost three-fourths over the 30-day norm, preliminary Thomson Reuters data showed. Stevens said the drubbing in cotton could have been a lot worse, but the market ran into trade buying, hedge fund purchases and possible mill fixation activity which enabled fibre contracts to prune its losses. "You had lots of spec shortcovering, trade buying on the low end of the scale. and possible mill fixation buying," a dealer said.
The traders said there may be a slight recovery on Friday, but future action will be dominated by the macro environment dictating movements in the commodity sector. The market will now turn its attention to the US Agriculture Department's monthly supply-demand report in October which should give a better idea of the size of the US cotton crop in 2011/12, traders said. Total volume traded Wednesday in the cotton market reached 15,954 lots, versus the previous session's count at 12,893 lots, ICE Futures US data showed. Open interest stood at 149,373 lots as of September 21, the lowest level since September 6 and compared to the prior tally of 150,007 lots, the exchange said.