NEW YORK, March 8: NYcotton futures remained at their daily 4-cent downside limit for most of the session and into the close for a second day in a row on Friday, but traders said volume was heavy with both buyers and sellers jumping in at the lows.
There was a fair amount of action today at that lower level, and there was some decent commercial buying down there, said Mike Stevens of Swiss Financial Services in Mandeville, Louisiana.
The ICE Futures’ May cotton contract finished 4.00 cents lower at 81.28 cents per lb, a 4.69 per cent decline to the daily downside limit. The session high was 83.55 cents.
The May contract began its steep descent on Thursday from a 12-1/2-year peak at 92.86 cents reached Wednesday.
The new-crop December cotton contract was also stopped at its 4.00-cent downside limit, settling at 87.53.
There was good volume today and it happened at the limit for quite a bit of the day. Some people were buying them at the limit, said John Flanagan of cotton broker Flanagan Trading corp. in North Carolina.
Cotton futures slid 4.0 cents, their lower daily limit, in early trading hours. Cotton gapped down at the open after holding at its 4.0 cent downside limit for much of Thursday as well, as futures prices tried to catch up with the implied price from even steeper declines made in the unrestricted options market a day earlier.
But once at the daily limit, cotton options only fell a couple more cents compared with about 10 cents on Thursday, suggesting to some players that it may have found tentative support at the day’s low.
Stevens pointed out, however, that there was little technical support illustrated on cotton charts and that Friday’s tend to draw more short-term traders who need to close out positions over the weekend, obscuring underlying trends.
Sometimes it’s difficult to get a true reading of value on a Friday. From a technical standpoint, we have retraced just about half of the move from the bottom in mid-February up to the (12-1/2 year) top hit on Wednesday, he said.
The unusually steep decline of cotton prices looks like a collapse, said one trader, adding that the A Index, which measures prices in international cotton markets, also collapsed, meaning that the global market is no better off.
Some participants will be waiting for adjustments to the US Department of Agriculture’s March estimates on cotton supply and demand statistics due Tuesday. Analysts said they see little change in most figures, but USDA will likely lower its US export forecasts.
Total volume on Thursday came to about 41,132 lots, partly because trading stopped at the downside limit. On Wednesday, when prices surged to its upside limit volume set one of the heaviest volume days on record at 83,471 lots—Reuters