ICE cotton rout continues for 11th session as investor selling weighs

Fri Nov 1, 2013 4:39pm EDT

* Prices hit 9-month lows as harvest pressure, investor selling weigh

* U.S. government data shows speculators reduce bullish stance to Jan. levels

* Indian output forecast to reach historic levels

NEW YORK, Nov 1 (Reuters) - Cotton futures closed down for an 11th straight session on Friday as growing supplies have driven investor selling, signaling the end of the speculator-driven rally that lifted cotton to 94-cent highs earlier this year.

The most-active December cotton contract on ICE Futures U.S. edged down 0.6 cent, or 0.8 percent, to settle at 76.58 cents a lb.

The spot contract hit an intraday low of 76.54 cents a lb, the weakest level since January, after posting an 11.5-percent loss in September.

New selling and the start of the index fund roll have added weight to spot prices already under seasonal pressure as Northern Hemisphere harvests pick up.

"The money that was moving into the sector is now moving somewhere else," said Michael Smith of T&K Futures & Options, a Port Saint Lucie, Florida-based brokerage.

Speculators reduced their bullish bets in cotton futures and options to the lowest level since mid-January in the week ending Oct. 22, U.S. government data showed on Friday.

With a 14-day RSI of 22, the spot contact is the most oversold it has been since June 2012, according to exchange data compiled by Reuters.

The December contract is down almost 18 percent from its August high of 93.72 cents and second-month prices are down in kind from March highs of 94.20 cents a lb.

Indian output is expected to reach a historic high this season, though exports from the No 2 producer are forecast to drop 13.5 percent due to slowing demand from top consumer China.

The U.S. crop is faring better than expected after unfavorable weather earlier in the season and traders eyed a possible higher production forecast from the U.S. Agriculture Department in its monthly crop report next week.

It will be the first since the USDA canceled October's report following a partial government shutdown.

Price support loans on 2013 crops are available again, following a one-month hiatus to satisfy budget cuts, the agency said on Friday.

Exchange stocks climbed to the highest levels since July on Thursday, the most recent ICE data showed. At nearly 150,000 bales, they have surged from fewer than 12,000 bales a month ago.

Falling prices have awakened demand for cotton, which continues to face steep competition from lower-priced, synthetic alternatives.

This week's U.S. government export data beat expectations. (Reporting by Chris Prentice; Editing by Chizu Nomiyama)

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