Cotton falls on continued profit-taking, sinking grains

NEW YORK - Cotton prices settled lower for a second straight session on Monday, weighed down by sinking grains markets and as speculative investors continued to book profits from the market's longest bull run in two years.

The most-active May cotton contract on ICE Futures U.S. slid 1.2 percent to 87.39 cents per lb, its biggest one-day fall since March 20.

Returning from the long holiday weekend, dealers attributed the selling to continued profit-taking after fiber's 18-percent rally in the first quarter and to plunging grain prices following the U.S. Department of Agriculture's planting intentions report on Thursday.

Corn prices sank to nine-month lows in the biggest two-day drop since mid-1996 as larger-than-expected U.S. stockpiles weighed down the market.

Weaker stock markets in the wake of disappointing U.S. and Chinese macroeconomic data also triggered some selling, while a hike in initial margins by the exchange late on Thursday also tempered some speculative buying that propelled prices up 18 percent in the first quarter.

Data released on Friday showed that speculative investors cut the size of their bullish bets in the week to March 26 in their first bearish move in a month. Even so, the net short was still at a five-year high.

Traders also digested news that China, the world's biggest consumer, kept sales volume in its auction unchanged, defying expectations that it could ramp up sales to help ease tight domestic supplies. Its two-year aggressive stockpiling policy has reduced availability to textile mills.

"Since not much of the cotton offered is being bought by their mills, they (the strategic reserve) may have decided not to offer more and make themselves look worse if interest remains low," said Knight Futures cotton specialist Sharon Johnson.

Later this week, the market is bracing for key U.S. nonfarm payrolls data due on Friday.