Cotton drops to new lows in 2012

COTTON declined to new 2012 lows.

After an early rally, due to overnight cash sales on Tuesday, futures began to slide, weighted down by rain in west Texas, and declining soybean prices.

The most active July set a five-month low at 86.06. It settled at 86.18, down 49¢.

Funds and commission houses were the main sellers, countered by scale-down trade price fixation buying in July.

Option activity was high, with a variety of bullish and bearish strategies in play.

Futures volume picked up, reaching an estimated 23,069 contracts.

The US dollar appreciated slightly.

Rainfall in west Texas - with forecasts for more; lower prices in China; weakening technicals plus anticipation of a US production figure higher than last season in Thursday's USDA Outlook, all conspired to weigh on prices.

Cotlook reported renewed broad inquiry, mainly from Aussie and Brazilian sources.

The Chinese markets eased further today, as crop prospects improved. Spring sowing in Xinjiang, China is virtually complete and most of the crop is reported to be emerging, with generally favourable weather.

However, some weather-related damage occurred last week. A forecast for localised heavy rainfall, and perhaps hail, could cause problems.

A big jump in the US crop in Thursday's report, and a minimal decline in global production numbers, is being built into the market.

Topics:  cotton markets opinion

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