NEW YORK (Dow Jones)--Cotton prices consolidated mostly higher on supportive
demand ideas Monday, shrugging off broad-based commodities and equities losses.
Nearby cotton for July delivery settled 0.48 cent, or 0.6%, higher at 81.20
cents a pound on ICE Futures U.S.
Cotton prices have consolidated sideways in the last week as July occupied a
range of 80 cents to 82.50 cents. However, prices have fallen 3% since hitting
two-year highs in late April. Bullishness sprang from rebounding world textile
demand as economic growth recovered. But those thoughts were damped by an
overhang of cotton in exchange stocks, a sign of cooling demand for raw cotton
from overseas textile mills.
Cotton prices continued to buck the weak commodities and equities trend
sparked by the climbing dollar. Traders continued to flee into the safe-haven
currency Monday in the face of ongoing uncertainty regarding European sovereign
debt.
Though cotton's fundamentals have come into question in the near term, world
production is still expected to fall short of supply in the current season and
the following year, as well.
"Mills are trying to figure out if they can get themselves to the new crop
without a lot of cotton; the jury's still out on that," said Ron Lawson,
managing director of LOGIC Investment Services in Sonoma, Calif.
The U.S. is the world's top cotton exporter and No. 3 producer. Most U.S.
fiber ends up in China, the world's top cotton producer, importer and textile
manufacturer. Last week, the country issued an additional import quota for 2010
of 800,000 metric tons in a move to cool local prices. However, much of the
cotton was thought to have been previously imported in anticipation of the
buying that would follow the quota's augmentation.
The large amount of cotton in exchange stocks, technically deliverable
against ICE cotton futures, could also be removed from warehouses by the
merchants that own it and sold to overseas textile mills in a moment's notice.
ICE daily cotton stocks decreased by 3,076 500-pound bales Friday to total
1.059 million, with 39,873 bales awaiting review and 30 decertification orders,
according to exchange data.
Speculative fund traders are moving to the sidelines in most commodities and
equities, including cotton, to await more clarity on the macroeconomic front.
"People will bide their time and see what happens with Europe," said Tom
Mikulski, a senior market strategist at Lind-Waldock in Chicago.
Traders are also keeping a close watch on December futures, representative of
the cotton that is being sown across the U.S. for next season's harvest.
ICE cotton open interest, which is the number of active positions left at the
end of the session, decreased by 91 positions Friday to total 178,787,
according to the exchange.
Volume was estimated at 13,386 lots. In options, approximately 5,391 calls
and 1,770 puts traded on the floor, according to exchange data.
Close Change Range
Jly 81.20 +48 pts 80.51-81.64
Oct 77.21 +41 pts 76.81-77.50
Dec 77.42 - 5 pts 77.05-78.00
