CFTC Probes Possible Manipulation in Cotton Market, People Say (Alan Bjerga, Matthew Leising)

 May 31 (Bloomberg) -- The U.S. Commodity Futures Trading Commission is investigating potential market manipulation of cotton futures after prices surged and then abruptly plunged in March, two people familiar with the probe said.

Results of the investigation may be released as soon as June 3, said the people, who asked not to be identified because the probe hasn't been made public. The Washington-based commission, which also is examining potentially improper trading in oil markets, began the cotton inquiry after seeing unusual gaps between futures and spot prices, the people said.

{xtypo_quote_left} The CFTC said in a statement May 29 it is investigating U.S. oil trading to determine whether the doubling of prices in the past year is the result of manipulation or fraud. {/xtypo_quote_left} 

Cotton traded on IntercontinentalExchange Inc.'s ICE Futures U.S. unit rose to a 12-year high of 92.86 cents a pound on March 5, then fell as much as 26 percent by March 20 to 69.02 cents. Supplies in the U.S. didn't justify the increase, cotton merchants told the commission during an April hearing on the role speculators are playing in rising commodities prices.

``The market is broken, it's out of whack, and someone has to step in and bring relief,'' William Dunavant Jr., chairman of cotton merchant Dunavant Enterprises Inc., said at the April hearing.

CFTC spokesman Dennis Holden said today in an interview the commission doesn't comment on whether it's conducting investigations. Intercontinental Exchange spokeswoman Kelly Loeffler said her organization also doesn't comment on possible probes. The investigation was reported earlier in the Wall Street Journal and the New York Times.

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