ICE cotton sinks near 3-week low, pressured by grains, dollar

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* Pressure from grains, dollar triggers automatic selling

* July contract closes below 100-day moving average

* Plantings progress eases supply concerns- dealers

NEW YORK, May 21 (Reuters) – ICE cotton sank to its lowest price in almost three weeks on Tuesday, as falling grains markets and a stronger U.S. dollar pressured investors to sell, triggering automatic sell stops, dealers said.

The most-active July cotton contract on ICE Futures U.S. closed down 1.92 cents, or 2.2 percent, to settle at 83.86 cents per pound. The session low of 83.82 cents was the front-month contract’s lowest since May 2.

The contract closed below its 100-day moving average of 84.68 cents, signaling technical weakness, dealers said.

The Thomson Reuters-Jefferies CRB, a benchmark for global commodities, slid. Cotton fell in sympathy with the grains markets, including corn and soybeans which compete with cotton for acreage, dealers said.

The dollar index gained against a basket of currencies, further pressuring dollar-traded raw materials by making them more expensive for buyers using other currencies.

“We’re feeling pressure from a general weakness in the grains. The break through 85 (cents) inspired some selling,” said Sterling Smith, a futures specialist with Citigroup in Chicago.

Cotton has closed down six of the last eight sessions. The next level of technical support is at late April’s lows just below 83 cents, dealers said.

The market felt further pressure after a U.S. government plantings progress report released after Monday’s close showed a steep ramp-up in cotton and other crop plantings in the week ending May 19. This report eased weather-related supply concerns from the world’s top exporter.

Cotton bulls have said that plantings delays could strain this year’s supplies, if they needed to stretch further into the new crop year beginning Aug. 1.

Trading volume increased on Tuesday, up to more than 26,000 lots from about 16,000 contracts the previous session and also higher than a 30-day average of about 24,000 contracts, preliminary Thomson Reuters data showed.

The December contract, which represents the new crop, moved into a premium to the spot contract for the first time in almost two weeks after the day’s trade. The contract closed at a 0.29 cent premium to July cotton, compared with a discount of 0.18 cent during the previous session.

December cotton on ICE was down 1.45 cents, or 1.7 percent, to settle at 84.15 cents a lb.

Open interest totaled 188,764 contracts on Monday, up by 2,191 lots from the previous session and higher for a 15th straight session, according to ICE data.

The increase in open interest has come on a combination of new investor long positions and merchant short positions, dealers said.

Speculators increased their net long position in cotton futures and option in the week to May 14 to the highest since early April, U.S. government data showed on Friday. (Reporting by Chris Prentice; Editing by David Gregorio)

Source: Reuters

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