* Cotton prices fall after rally
* Higher dollar weighs on commodities prices
* CFTC graphics r.reuters.com/buv87r
By Chris Prentice
NEW YORK, Feb 4 Cotton prices pulled back from
recent highs on Monday as the U.S. dollar gained, certified
stocks rose and speculative buying that has driven fiber's
longest bull run in two years waned.
The most-active March contract on ICE Futures U.S.
fell 1.24 cents, or 1.5 percent, to settle at 81.74 cents per
lb. The drop, only the third in the past fourteen sessions,
pushed the front month through its 9-day moving average.
"We've had a nice run in the market, we're due for a little
bit of a pullback," said Ron Lawson, a partner at commodity
investment firm LOGIC Advisors.
Lawson said the stronger U.S. dollar, a deterrent to
exports of products like cotton, helped spur the pricing
correction. Cotton underperformed the entire Thomson Reuters
Jefferies CRB Index, which declined in Monday's
A recent uptick in supply onto the exchange also weighed on
cotton prices, with over 51,000 480-lb bales awaiting approval
from the U.S. Department of Agriculture, according to ICE data.
That compares to about 5,000 bales at the start of the year.
It is also in addition to the 144,271 bales already
registered with the exchange, up from the approximately 8,000
bales in October following a seasonal draw-down on stocks
following the previous growing season.
Total trading volume was more than 39,000 contracts,
according to preliminary Thomson Reuters data. That was more
than double the 250-day average, although activity in the spot
contract has fallen and business further along the curve has
picked up as funds roll their positions into May and July.
Overall open interest has jumped by almost a third over
210,000 lots, its highest in two years, while outstanding
contracts in the spot contract, which expires on March 6, have
fallen for seven straight sessions, down 12 percent to just over
Even after Monday's decline, speculative buying has pushed
cotton prices up 9.4 percent year to date. Fiber was the best
performing commodity in the Thomson Reuters-Jefferies CRB Index
last month, rising a whopping 10.5 percent in January
and registering its largest monthly gain since early 2011.
Following their buying spree, hedge funds and other
speculative investors are holding their largest net long
position in more than two years.
But the recent price spike has already dissuaded some end
users from buying fiber, said Jobe Moss of MCM Inc. in Lubbock,
"When you take the prices up like that, business slows
down," Moss said.
Last week, U.S. government sales data indicated a decrease
in export sales from the prior week, as well as the first time
Chinese buyers had canceled bales since mid-July.
Looking ahead, the USDA is set to report on the country's
cotton supply and demand on Friday. Last month, cotton prices
rose after the government cut its outlook for U.S. cotton
production even though it raised its global surplus
(Reporting By Chris Prentice; editing by Andrew Hay)