US cotton sinks again; erases recent gains

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* Prices pierce support at 100-day MA

* Pending stocks rise 40 pct

* Certified inventory still at ICE record lows

NEW YORK, Oct 24 (Reuters) – U.S. cotton futures sank 2.2 percent on Wednesday, as technical selling accelerated after the market pierced its 100-day moving average, with the market giving up all the ground it gained last week.

Falling for a second day, the most-actively traded December cotton contract on ICE Futures U.S. settled at 72.67 cents per lb, down 2.2 percent.

A late flurry of buying helped prices move off their intraday low of 72.06 cents, but prices have fallen over 8 percent since peaking at five-month highs just below 80 cents last Thursday.

   “We are still not sure what caused the recent price spike and the rapid decline makes it all the more puzzling,” said Andy Ryan and Gary Raines from INTL FCStone.

The market may find support at 72.22 cents in the short term, but the bearish outlook, with analysts expecting record crops and falling demand, may still send prices through the psychologically key 70-cent mark.

“The market seems eager to retest the fundamental and technical support just above 70 cents. If it doesn’t hold, there are a lot of new longs that may need to hit the exits,” Ryan and Raines said in a note.

Trading the December-March spread dominated much of the over 28,000 lots that changed hands on the day. The backwardation, with nearby prices above March, narrowed to just 0.15 cent after the heavy selling into December. The March contract fell almost 2 percent to 72.52 cents.

Signs of increasing availability emerged as the U.S. harvest gets underway with more fibers awaiting certification. Bales pending review rose 736 480-lb bales, up 40 percent, to 2,540 bales overnight.

Even so certified stocks at 8,446 48-lb bales are still at their lowest levels since ICE records began in 2002.

Cotton’s fall was heavier than the broader market and came even as the grains market, usually a support, rallied – wheat jumped after Ukraine slapped a ban on exports in a bid to preserve domestic supplies after crops were damaged by drought.

 The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, dropped 0.73 percent to its lowest level since early August, dragged lower by oil and gold.

 Another day of anemic corporate earnings hurt sentiment amid rising concerns about the deepening debt crisis in Europe as Spain moved closer to seeking a bailout.    (Reporting by Josephine Mason; editing by Gunna Dickson)

Source: Reuters

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