Cotton futures fall, head for biggest weekly loss since August

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* Cotton slump continues after Monday’s steep losses

* U.S. government budget impasse keeps investors skittish

* Exchange stocks on the rise – ICE data

NEW YORK, Oct 9 (Reuters) – Cotton futures fell on Wednesday for the third session this week after Tropical Storm Karen left U.S. crops in key growing regions unscathed and as the continued U.S. government shutdown kept investors uneasy.

The most-active December cotton contract on ICE Futures U.S. edged down 0.49 cent, or 0.6 percent, to settle at 83.20 cents a lb.

Prices have fallen for the past two sessions after seeing a huge drop on long liquidation on Monday, as a tropical storm that threatened crops in the world’s top exporter dissipated.

The second-month December contract is on track for its steepest weekly loss since late August.

“After the big move down, the market is catching its breath,” said John Flanagan of Flanagan Trading Corp in North Carolina.

In addition to the easing weather worries, the budget impasse and government shutdown in the United States has kept investors on edge, pressuring fiber prices.

This week’s dip prompted mills to fix prices with merchants, keeping the futures market from steeper losses, dealers said.

Merchants have said that mill business had been quiet in the weeks leading up to Monday’s big drop, as high prices damped demand.

U.S. government export data will not be published this week. The U.S. Department of Agriculture will also not publish monthly crop reports that had been scheduled for Friday.

“The market is essentially flying blind,” Flanagan said.

Vietnam’s exports are expected to jump this year, a Vietnam newspaper reported. The United States accounts for 43.5 percent of the country’s imports.

Certified cotton stocks have risen to 14,700 bales this week, with another nearly 22,000 awaiting review.

The rise in exchange inventories pushed the December contract to a discount to the March contract for the first time since May.

Concern over tight U.S. supplies had thrown futures into an inversion, seen as unusual for a market anticipating a record global surplus by the end of July.

December’s discount increased to 0.78 cent a lb on Wednesday, up from 0.46 cent a lb during the previous session.

The thinly traded October contract on ICE closed down 0.24 cent, or 0.3 percent, at 81.95 cents a lb on the day of its expiry.

(Reporting by Chris Prentice; Editing by James Dalgleish)

Source: Reuters

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