ICE Cotton Futures Settle Lower

US cotton futures finished lower on Tuesday as speculative buying powered the spot contract to a fresh record high, but that faded and back months sank as a lack of support and fears of a slowdown in top consuming countries such as China weighed on fibre contracts.

The cotton market had risen nearly 20 percent since mid-January, driven by strong prices in top consumer China and tight deliverable supplies in the US cotton market. The key March cotton contract on ICE Futures US fell 0.11 cent to close at $1.6183 per lb, with the contract hitting a new spot record high at $1.6789. Total volume was twice the 30-day average at 38,800 contracts, Thomson Reuters preliminary data showed.Spot March was driven by heavy speculative buying but the rest of the board "did not have the same support" and lost ground as a result, said Sharon Johnson, senior cotton analyst at brokerage Penson Futures.

Deferred contracts closed roughly 2 to 3 cents lower. Some investors may be forced to pay up to get out of their positions in the March contract, said Mike Stevens, an independent analyst in Mandeville, Louisiana. Other traders believe that the March contract aside, the back months were also pressured by macroeconomic factors, with inflationary worries in top Asian consumers such as China pressuring cotton contracts.

Overnight Chinese cotton prices were softer, with the key September cotton futures on the Zhengzhou Commodity Exchange last done at 31,505 yuan per tonne, down 445 yuan on the day. The market is waiting for the closely watched cotton potential plantings survey by industry group the National Cotton Council. The group will release the results of the survey after the market closes on February 4. A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings at around 12.48 million to 12.53 million acres, which would be a five-year high and an increase of around 15 percent from last year's 11.04 million acres.

ICE Mar11 Cotton Trend: