* Fiber posts biggest one-day loss in seven months
* Spot prices down more than 13 percent
* Fall past technical support prompts automatic selling -
NEW YORK, April 24 ICE cotton fell to a fresh
two-month low on Wednesday, recording its biggest one-day loss
since September, as investors continued to liquidate their
positions and take the wind out of a speculator-driven rally
that pushed prices to one-year highs last month.
The most-active July cotton contract on ICE Futures U.S.
dropped 2.15 cents, or 2.5 percent, to settle at 82.95
cents a lb.
The spot May contract closed down 1.58 cents, or 1.9
percent, at 81.10 cents a lb, down more than 13 percent from a
high of 93.93 cents a lb reached on March 15.
As prices sank, automatic sell stop orders were triggered
and July prices fell as low as 82.84 cents a lb, the
second-month contract's lowest price since late February.
"That's where the sell stops live. The market has been
trying to find support and catch itself, but we're on the
defensive," said Ron Lawson, a partner at commodity investment
firm LOGIC Advisors, pointing to technical support near 82 cents
Open interest totaled 170,556 contracts on Tuesday, having
fallen for each of the last eight sessions.
Speculators have slashed a large bullish position in cotton
futures and options to the lowest price since late January, U.S.
government data showed on Friday.
The noncommercial dealers boosted their position to a
five-year high in March, helping drive a first-quarter gain of
18 percent. As they liquidated their positions, cotton's upward
momentum stalled and prices have fallen steeply.
"The commodities exodus spooked a lot of the longs," said
Peter Egli, director of risk management for Plexus Cotton Ltd, a
British-based medium-sized merchant.
The Thomson Reuters-Jefferies CRB, a benchmark for
global commodities, posted its largely weekly drop since June
Some 122 contracts, or about 12,000 bales, were set to be
delivered against the May futures contract as of the first
notice day of delivery on Wednesday, according to ICE data.
Between that small delivery and just 894 contracts of open
interest remaining in the contract before its expiry on May 8,
no more than about 100,000 bales of cotton, at most, could be
pulled from exchange stocks for May delivery, Egli noted.
Though the May/July spread narrowed by 1.85 cents a lb from
2.42 cents previously, July cotton still holds enough premium
that merchants can afford the holding costs needed to maintain
ownership of cotton, dealers said.
Certified stocks totaled 505,159 bales on Tuesday, according
to ICE data, continuing their climb to the highest level since
Mills held off buying into a falling market and continued to
purchase in a hand-to-mouth pattern, lending little support to
falling prices, traders said.
Still, dealers said they export strong export levels to
continue, even with China and India, the world's largest
producers, selling out of state reserves.
Solid demand and a sense of tightening global supplies
outside of China underpinned cotton's rally earlier this year,
More than half of a projected record global surplus by the
end of the crop year through July is expected to become part of
China's inventories and is considered unavailable to the global
Beijing began building its reserves, paying above global
prices to support farmers.
The world's largest textile market is forecast to hold
enough cotton in its inventories to feed fiber demand for more
than a year, and the country plans to continue its stockpiling
program this year.
(Reporting by Chris Prentice; editing by John Wallace)