NEW YORK (Dow Jones)--Cotton prices rose Thursday as available stocks are
whittled away and end-users strategize means to acquire more.
Nearby cotton for October delivery settled up 0.8 cent, or 1%, at 79.57 cents
a pound on ICE Futures U.S. Most-active December cotton settled 0.78 cent, or
1%, higher at 74.71 cents a pound.
Cotton prices have been stuck within a 73-cent to 75-cent range for the last
two weeks after sliding lower on outlooks for a bumper U.S. cotton harvest in
the fall. World supplies are low after demand rebounded with macroeconomic
conditions. Overseas textile demand is strong, and those end-users have been
buying cotton that will be delivered in the fall. Traders with positions on ICE
that expect to take delivery of that cotton are realizing that dwindling
exchange stocks may not grow by the time they need the fiber.
"There is this panic mode in place: 'There's no cert stock, what are we
going to do?'" said Sharon Johnson, senior cotton analyst at First Capitol
Group in Atlanta.
So much of the incoming U.S. crop has been sold to make commercial traders
nervous that the cotton they would like to purchase via futures may not be
there when they need it.
ICE daily cotton stocks decreased by 11,348 500-pound bales Wednesday to
total 75,782 with 6,701 bales decertification orders, according to exchange
data. Most U.S. stocks from the 2009 harvest have been sold, and traders are
awaiting an influx of supply in the fall.
Cotton prices have also lost 6% in the last five weeks, and market momentum
was due to turn higher, analysts said. Traders bought back previously sold
short positions to exit bearish bets.
The market is likely to continue within its 73-cent to 75-cent band in the
near term.
"Lacking any outside news, cotton remains stuck within its range," said
Sterling Smith, market analyst at Country Hedging in St. Paul, Minn.
The tropical storm forming in the Bahamas could usher welcome precipitation
into the cotton fields of Southeast U.S., the Mississippi River Delta region
and parts of Texas, Johnson said. The storm is expected to track a path along
northern Cuba and southern Florida and into the Gulf of Mexico sometime Friday.
The system could approach the Louisiana or Texas coastlines by early Sunday.
ICE cotton open interest--the number of active positions left at the end of
the session--increased by 1,197 positions Wednesday to total 158,960, according
to the exchange.
Volume was estimated 21,298 lots. In options, approximately 17,971 calls and
8,390 puts traded, according to exchange data.
Close Change Range
Oct 79.57 +0.80 78.59-79.57
Dec 74.71 +0.78 73.58-74.74
Mar 74.11 -0.20 73.55-74.70