Cotton futures finished easier on Wednesday on profit-taking after climbing previously to a three-week top with the market still facing the prospect of tight deliverable supplies, brokers said. The December cotton contract shed 0.39 cent to close at 76.31 cents per lb, dealing from 76.11 to 77.29 cents.
On Tuesday, the contract ended at 76.70 cents in the highest close for the second position contract since July 8, according to Thomson Reuters data. The spot October cotton contract fell 0.88 cent to finish at 80.57 cents. October has a 4.26 cents premium over key December, down from the previous session's premium of 4.75 cents. Volume traded in the December contract stood at 8,724 lots at 2:26 pm EDT (1826 GMT). "You're getting profit-taking from the Dec(ember)/March spread," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
He said the bout of profit-taking in cotton could be seen both in trading for both futures and option contracts. Spread-linked buying has spurred the recent rally in cotton. The market is still looking at the steady decline of US certificated cotton stocks, which stood at 50,825 (480-lb) bales as of July 27, from 53,315 bales on July 26. On June 3, they stood at 1.08 million bales. Cotton stocks are at their lowest level since 2004, according to exchange data.
The October and December cotton contracts remained in backwardation. Normally, the front month would be at a discount to the back months in a market. In backwardation, the situation is reversed and the front month runs at a premium.
The market will now wait for release of the US Agriculture Department's weekly export sales data on Thursday to gauge fibre demand. Cotton brokers expect total US cotton sales to range from 300,000 to 400,000 running bales (RBs, 500-lbs each), from sales last week at 382,000 RBs.
Brokers Flanagan Trading Corp sees support in the December contract at 76.15 and 75.10 cents, with resistance at 77 and 77.90 cents. Volume traded Tuesday reached 19,356 lots, from the prior tally of 21,278 lots, ICE Futures US data showed. Open interest in the No 2 cotton market was at 164,498 lots as of July 27, compared to the prior 165,168 lots, the exchange said.
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