Cotton posts 3rd straight weekly drop after striking 9-month high

Fri Feb 22, 2013 5:09pm EST

* Fiber falls in late-day trading on consolidation

* Commercial net short position cuts prices from high

* Lowest export levels in 12 years for 2013/14 crop-USDA

By Chris Prentice

NEW YORK, Feb 22 (Reuters) - Cotton slipped from earlier gains on Friday, posting a third straight weekly loss, as strong U.S. export data failed to outweigh consolidation after the fiber reached nine-month highs earlier this week.

The most-active May cotton contract on ICE Futures U.S. slid 0.09 cent, or 0.1 percent, to settle at $83.14 cents per pound on Friday.

Friday's fall came in afternoon trading after cotton had been up for much of the day, supported by strong weekly U.S. export data. A large commercial net short position pulled prices back from highs this week to its previous trading range.

"There was still enough opposition by the trade to reject further advances for now, forcing the market to retreat," said Peter Egli, director of risk management for Plexus Cotton Ltd, a British-based medium-sized merchant.

Prices rose as high as 85.24 cents a lb on Wednesday, the highest since May 2012. They failed to retain the momentum and slid about 0.06 percent from last week's close, a third straight weekly decline.

Cotton has surged more than 9 percent since the start of the year, largely driven by speculators who have increased their net long position in fiber to 2-1/2-year highs.

The commercial side of the trade has met the bullish speculators' bets in kind. Their net short position in cotton futures and options totaled 97,628 contracts in the week to Feb. 19, the highest since September 2010, Commodity Futures Trading Commission data showed.

May cotton futures have held tightly to their more short-term 14-day and 9-day moving averages, and were well above their 50-, 100- and 200-day ones.

"We haven't really broken the upward trend, the market is just consolidating. Technically, the market looks strong," said Nick Gentile, senior partner of commodity trading consultancy Atlantic Capital Advisors.

While weekly U.S. export volumes were down in the week to Feb. 14 from the previous one, at nearly 171,600 running bales, they remained 10 percent above the prior four-week average, the U.S. Department of Agriculture said on Friday. Shipments of earlier sales were strong.

"I was thinking we'd see some cancellations, but it doesn't seem like it. We're in this upward trend," said Jobe Moss, an analyst for merchants and brokers MCM Inc in Lubbock, Texas.

Trading volumes were light at about 15,000 lots, compared with a 30-day average of about 24,000, preliminary Thomson Reuters data showed.

Cotton futures were seen to be vulnerable to a larger downturn, despite the technical uptrend and strong export data so far this year.

The world is forecast to see a record surplus for the 2012/13 marketing year. U.S. exports are forecast to decline to their lowest in 12 years in the upcoming crop year on falling global demand for fiber, especially in China, the world's top buyer. (Reporting By Chris Prentice. Editing by Andre Grenon)