A stand-off between cotton bulls and bears ended with the sellers taking control, backed by the threat of Chinese cotton sales, and an upbeat estimate on US sowings of the fibre.
May cotton futures, having closed in essence flat in New York for the last three sessions, stood down 2.2% at 57.10 cents a pound in late deals on Friday, dropping back below its 10-day and 20-day moving averages.
“I don’t’ see a lot of fundamental information to drive this market higher,” Louis Rose, of the Rose report, told Agrimoney.
“There wasn’t’ enough data to say the market should have gone up.”
Planting in the spotlight
Indeed, on Friday, private analyst group Informa forecast 2016 all-cotton planting in the US at 9.5m acres, up from the 8.6m acres sown last year, and above estimates from many other commentators too.
The National Cotton Council has forecast 2016 plantings at 9.1m acres, while the US Department of Agriculture has pegged plantings at 9.4m acres.
Mr Rose, terming Informa’s number was “optimistic”, forecast that sowings would be likely to come in at about 9m acres, saying that some farmers who lost money on cotton last year, might not be keen to take on the risk of heavy plantings this year, given the crop’s high input costs.
Famers would “err on the side of risk management” by limiting cotton acres, and likely in many cases switch to soybeans which, in fixing their own nitrogen from the atmosphere, have lower fertilizer costs.
Chinese uncertainties remain
Meanwhile, investors are still waiting for details on an upcoming Chinese cotton auction, as the Beijing government is shortly expected to release some of its huge state owned inventories.
“How much their going to release, how much it’ll be on the hook, all of those things will make a difference,” said Mr Rose.
“It just puts a cap on the market.”
China did issue some cotton news, with the government dropping its cotton target price for 2016 in the key growing region of Xinjiang to 18,600 yuan a tonne, from 19,100 yuan a tonne.