NEW YORK (Dow Jones)--Demand-driving buying Tuesday kicked ICE Futures U.S.
May cotton to the highest prices for a most-active contract in nearly a year
and a half.
Most-active May cotton settled up 7 points, or 0.08%, at 79.77 cents a
pound--near the 80.10 intraday high, the strongest price for a most-active
contract since Sept. 5, 2008.
ICE cotton prices have risen 16.9% in the last 12 sessions as outlooks for
strong demand from textile mills trigger buying that coincides with bullish
technical charts. Analysts said commercial traders are trying to get out of
short positions while speculators buy bullish long positions.
Most recent U.S. Department of Agriculture data anticipated world cotton
production would fall 12.4% short of demand in the August-July crop year, while
adding another 9% to outlooks for U.S. cotton exports. The change whittled
estimates for available cotton stocks by 23.25% in the U.S., the world's top
cotton exporter. Demand from overseas mills had surged as prices backed off
early in the year. However, analysts note mill buyers are sitting on the
sidelines and waiting for lower prices.
Cotton traded a back-and-forth session Tuesday as profit-taking pressure at
highs gave way to short-covering at lows, or buying to close out exposure to
bets that prices will fall.
Aside from profit-taking sales at highs, the stronger dollar applied pressure
to cotton prices as well, analysts said. Disappointing U.S. consumer confidence
data sent investors back into the safe-haven dollar, which weighed on
commodities prices including metals and crude.
However, May cotton pushed through Monday's 79.79 high in late trade to
settle near 80.10.
Analysts said cotton prices may be due for a technical setback after such
strong gains.
Cotton's fundamentals remain intact, although the May contract could correct
back to 77 cents within a week before working higher, says Spencer Patton,
chief investment officer at Steel Vine Investments in Chicago.
ICE daily cotton stocks increased by 7,881 500-pound bales Monday to total
7,881 bales with 48,458 bales awaiting review, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--increased by 1,106 positions Monday to total 165,649, according to
the exchange.
Volume was at 17,249 estimated lots. In options, approximately 4,825 calls
and 3,233 puts traded, according to exchange data.
Close Change Range
Mar 80.00 -74 pts 79.56-80.96
May 79.77 + 7 pts 78.71-80.10
Dec 73.75 +32 pts 73.25-74.09