NY cotton closes at one-week low, outlook glum

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* Players scramble to exit July positions

* Falling outside markets pressure cotton

* July and December contract fall 5.00 cent daily limit

NEW YORK, June 21 (Reuters) – Cotton futures closed at a one-week low Thursday on all-around speculative sales, losing most of the ground gained Tuesday when it hit a seven-week top, as investors scrambled to get out of the July contract before it goes into delivery next week, brokers said.

Cotton was also hammered by lower outside markets and weak manufacturing data in the major cotton consuming centers of the United States, Europe and China.

“The guys cannot get out (of July) fast enough,” said Sharon Johnson, senior cotton analyst at brokerage Knight Futures in Atlanta, Georgia.

“The outside markets did not help any … and they just proved too much” for cotton futures, she added.

The spot July cotton contract on the ICE Futures U.S. exchange fell the 5.00 cent daily limit, or 6 percent, to end at 78.17 cents per lb, with the day’s top at 82.50 cents.

On Tuesday, the contract rose the 5.00 cent daily limit to settle at 87.98 cents in the highest close for the spot contract since early May, Thomson Reuters data showed.

Key December lost 5.00 cents as well, or 6.88 percent, to finish at 67.71 cents per lb, with the day’s high at 72.13 cents. It was the lowest settlement for the benchmark cotton contract since June 5.

Volume traded on Thursday stood near 33,000 lots, about a third above the 30-day norm, Thomson Reuters data showed.

Market players were unwinding positions in July, with open interest in the contract falling 10,952 lots to 6,270 lots as of Wednesday, ICE Futures U.S. data showed.

Brokers estimate that 2,000 to 3,000 lots were liquidated on Thursday. Johnson believes open interest in July will be small by the time first notice hits on Monday.

Investors are getting out because it would be very difficult for them to get their hands on cotton they can deliver against the board because most U.S. fiber has already been harvested and sold, they said.

Under exchange rules, only U.S. cotton is deliverable at the exchange.

Wednesday’s volume reached 42,145 lots, down from the 55,893 lots traded on Wednesday, which was the highest level since June 11, ICE Futures U.S. data showed.

Open interest in the cotton market, an indicator of investor exposure, fell for the fifth session running and amounted to 169,872 lots as of June 20, the lowest since Jan. 30, exchange data said. Open interest in cotton has fallen almost 15 percent over the past five sessions.

(Reporting by Rene Pastor; Editing by Jim Marshall)

Source: http://www.reuters.com/article/2012/06/21/markets-cotton-idUSL1E8HLIIQ20120621

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