NEW YORK, April 27: NY cotton futures reeled from a barrage of fund selling into stops to finish weakly on Friday, with imminent passage of a Farm Bill and rains in West Texas exacerbating the market’s already glum mood.
Mike Stevens of Swiss Financial Services in Mandeville, Louisiana, said the new farm subsidy law raises the very real possibility of gross overproduction for the next six years.
Other factors pressuring cotton included rains in West Texas in front of the start of their optimum planting dates, weak technicals and the Friday factor, when many traders are inclined to throw in the towel on losing positions for the weekend, Stevens added.
Spot May cotton drooped 1.45 cents to end at 33.55 cents a lb, moving from 33.50-34.50 cents. On a spot basis, it was the lowest level since late February when the then-front contract was trading just above 33 cents.
Key July sank 1.48 cents to finish at 35.27 cents, trading 34.90-36.30 cents. Back months fell 1.10-1.40 cents.
Futures got pounded from the opening bell, with speculative fund sales into stops knocking the market down before modest support came in at the lows, floor sources said.
We could see cotton acreage creep up to 15 million acres, he said, adding the much stronger safety net provided by the bill would definitely not cut back on the planting intentions of American cotton farmers.
Last year, cotton plantings hit 15.8 million acres and the result was a massive US cotton crop of 20.30 million (480-lb) bales. Along with huge crops in other nations, bumper supplies dragged cotton prices down to a near 30-year low in 2001.
That issue has not been addressed by the Farm Bill, Sharon Johnson, cotton expert for Frank Schneider and Co. Inc. in Atlanta, said in a separate interview in alluding to subsidies spurring overproduction. That leaves the market to do the job for us.
Floor sources said estimated final volume stood at 14,000 lots, up from the prior tally of 7,864 lots.
Open interest in the cotton market rose 353 lots to 65,457 lots as of April 25.—Reuters