Cotton futures settled down the daily limit on Thursday on investor liquidation as weak demand and fear over a global recession which hit other financial markets depressed fibre contracts, analysts said. The spot December cotton contract on ICE Futures US dropped 4.00 cents to finish at 99.50 cents per lb, with the day's top at $1.0396. The now most-active March cotton futures fell 4.00 cents to end at 96.48 cents, with the session high at $1.0085.
Total volume traded Thursday hit over 21,000 lots, little different from the 30-day norm, preliminary Thomson Reuters data showed. Mike Stevens, an independent analyst in Louisiana, said speculative accounts had lifted the market over the past few sessions.
But he said the combination of weak demand and falling financial markets as investors fretted the eurozone debt crisis could spread further undermined cotton and other commodity markets.
"You look at all the outside markets, there's no incentive to defend" long speculative positions in cotton, said Stevens. The shakiness of the demand outlook could be seen in news that industry publication Cotlook cut its forecast of world 2011/12 cotton consumption and raised its estimate of world 2011/12 cotton ending stocks. The Chinese were again the big buyers in the US Agriculture Department's weekly export sales report on Thursday, but one dealer feels the reaction of cotton futures was one of "buying the rumour and selling the fact."
Open interest in cotton, usually taken as an indicator of investor exposure in cotton, stood at 140,095 lots as of November 16, from the prior tally of 143,259 lots, exchange data showed. Total volume traded Wednesday in the cotton market reached 25,736 lots as of November 16, from the previous 57,321 lots which is the highest level traded since February 18, ICE futures US data said.