NEW YORK: Cotton futures closed Monday near a month low on fund liquidation as investors scampered out of the spot contract before it goes into delivery on first notice day next week, traders said.
The benchmark May cotton contract on the ICE Futures US exchange fell the 4.00 cents daily limit to end at 88.08 cents per lb, with the session top at 92.13 cents.
It was the lowest settlement close for cotton since March 20, according to Thomson Reuters data.
The market has been moving in a wide band from 87 to 94 cents, basis the spot contract, since the start of March, Thomson Reuters data showed.
Monday's estimated volume reached slightly over 45,500 lots, almost double the 30-day norm, according to Thomson Reuters data.
"The longs are being punished for overstaying their welcome," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures in Atlanta. "It's long liquidation."
Open interest in the May contract stood at 25,336 lots as of April 13 so the pressure to liquidate positions and not take delivery has been ratcheted up, dealers said. There are five sessions left before first notice day.
Another source of pressure may have come from the grains complex, which also got hit by long liquidation, dealers said.
Open interest stood at 189,538 lots as of April 13, still near the 193,427 lots on April 5, which was the largest number of open cotton futures contracts since Feb. 15, 2011, ICE Futures US exchange data showed.