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NY cotton comes under pressure from fund selling

NEW YORK: NYCE cotton futures settled just off intraday lows on Friday, when an early pop higher on strong export figures was overshadowed by fund, speculative and local selling, traders and brokers said.

May cotton settled down 1.48 cents at 58.85 cents a lb after trading 60.80-58.80 cents.

Spot March shed 1.27 to 56.88 cents. Back months lost 0.25 to 1.25 cents.

"The market opened higher off a good export figure, but everyone just sold into it. It was broad based and I think there was a lot of profit taking from the funds," one Texas-based broker said.

Cotton prices saw a brief movement higher just after the market opened in reaction to solid US export sales and shipment figures, brokers said.

Traders said that a lack of follow-through buying caused the market to reverse and as it pierced support at 59 cents (May basis), further fund and speculative selling appeared.

"The market may also have been influenced by other outside markets. You see the stock market's down, as well as gold and silver and all the grains," Keith Brown, president of commodity trading firm Keith Brown and Co. in Georgia said.

He added that the market was still "dealing with the low consumption number" from the previous day, as well as the USDA baseline projections for the cotton industry.

"It's basically a look into the future and the future looks like still too much cotton," he said.

USDA cotton analyst Carol Skelly said Friday US all-cotton plantings will be 15 million to 15.5 million acres in 2000/01 crop year, the highest level since 1995.

Despite a projected increase in exports, the bigger US crop will push cotton stocks higher by as much as one million bales, Skelly said.

Scale down trade buying provided support in morning trading, allowing the market to hold above the 59 cent support level earlier in the day.

On a technical basis, dealers said near-term resistance in May remained intact at the session peak of 61.50 cents, with 62 and 63 cents the next targets on the upside. Support was pegged at 58.80 cents.

"I would keep a close eye on the next two trading days as I expect the market to liquidate some of a long position," Memphis-based STA Trading Services said in a daily report.

Estimated volume was 10,000 lots versus previous volume of 8,833 lots.

The NYCE is a subsidiary of the New York Board of Trade.

-Reuters