NEW YORK, Oct 4: Cotton futures ended lower on Friday on light investor sales as jittery players dumped fiber contracts while digesting the impact of a $700 billion rescue package approved by the US Congress, brokers said.
The benchmark December cotton contract fell 1.03 cents to conclude at 57.41 cents per lb, dealing from 57.35 to 59.34 cents. March dropped 1.01 cents to 61.94 cents.
Volume traded in the December contract stood at 7,534 lots at 2:43 p.m.
Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said the cotton price of the benchmark contract would need to get up to 59.50 (cents, basis December), an area from where it failed recently, or it is not going anywhere.
He and other analysts believe the market would need to digest the decision by the US Congress to finally approve a $700 billion plan to stabilize financial markets unhinged by the credit crunch.
Eventually, the uncertainty and fear surrounding the economical and financial situation in the US will fade and investors will return and in the case of cotton, the potential for another sizeable drawdown in stocks into 2009/10 may allow it to emerge sooner from its current malaise, said a report by Sharon Johnson, cotton expert with First Capitol Group in Atlanta, Georgia.
In a classic case of the commodity trade adage of buying the rumour and selling the fact, cotton futures crumbled from late investor sales, dealers said.
We still need to see how this plan will work out. With demand being hit by this economic slowdown, there’s very little appetite to give any props to this market, one explained.
Analysts said the direction of the market next week will likely be choppy in front of the US Agriculture Department’s monthly supply/demand report which is due to be handed out on Friday.
Brokers Flanagan Trading Corp sees support in the December contract at 57 and 56.10 cemts. with resistance at 57.75 and 58.75 cents.
Volume traded in the cotton market Thursday was 18,545 lots, exchange data showed. Open interest in the cotton market dropped 3,407 lots to 191,970 contracts as of Oct 2, it added.—Reuters