September 25, 2012 / 9:23 PM / 5 years ago

U.S. cotton falls again on seasonal selling ahead of harvest

* Market braces for upcoming harvest
    * Selling pressure could push prices to 64 cents - trader
    * Some specs buy Dec 2013 on hope of price recovery

    NEW YORK, Sept 25 (Reuters) - U.S. cotton remained under
pressure on Tuesday, hitting fresh five-week lows on seasonal
selling ahead of the Northern Hemisphere harvest.
    Falling for a fourth straight session, New York-traded
cotton for December delivery settled down 0.17 cent, or
0.23 percent, at 72.33 cents per lb on ICE Futures U.S. 
    That was near the weakest reading for the day and held
prices at lows last seen on Aug. 15.
    "It's in the seasonal window and prices will decline in the
harvest," said Keith Brown, president of commodity firm Keith
Brown and Co in Moultrie, Georgia.
    Bearish sentiment as Northern Hemisphere farmers prepare to
harvest crops offset any strength the market may garner from a
weaker dollar, traders cautioned. 
    A stronger dollar makes it more expensive for holders of
other currencies to buy dollar-denominated commodities. The
greenback's drop on Tuesday provided little support. 
    "Cotton will test the June lows," said Brown. Prices sank to
as low as 64 cents per lb at the start of June, which was its
lowest level since October 2009.
    While the short-term outlook remains bleak, some speculative
traders have bought far forward on a bet that prices will
recover by the 2013/14 marketing year as farmers grow less
cotton in favor of higher-priced grains. They hope falling
output will eat into the record surplus.
    Even so, the forward physical market remains extremely
quiet, with traders complaining about sinking volumes.
    December 2013 prices are above the nearby contract,
but have also fallen the past four sessions. Prices settled at
77.08 cents per lb, also a five-week low, down 0.41 percent.
    Trading volume was extremely low with only 35 lots changing
hands on the day. That compares with over 13,000 traded in the
December 2012 contract. 
    Traders caution it may take more than a year of falling
production to erode the excess supply washing around the market.
    The carryover at the end of the most-recent 2011/12 season
was a record high, and the U.S. Department of Agriculture has
forecast stocks will hit another all-time high above 76 million
bales for the marketing year to July next year.
    Conditions are all the more challenging as the sluggish
global economy stifles demand and textile mills use less natural
fiber and more lower-priced manmade material after the wild
price swings that roiled the market over the past few years.
    Cotton underperformed the broader commodity market on
Tuesday, with the 19-commodity Thomson Reuters-Jefferies CRB
index rising 0.25 percent as the euro recovered from
one-week lows and oil rose. 
    Prices have fallen every week for the past month and are
down about 12 percent for the year-to-date.
    Even so, the market is on track to post gains for the third
quarter. The small rise, just under 1.5 percent, comes after a
21-percent plunge in the second quarter. 
    Friday is the last trading day of the quarter.    

 (Reporting by Josephine Mason; editing by Jim Marshall)

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