Cotton futures closed higher Thursday, helped by speculative buying that may
have been encouraged by strong economic growth in China.
Technical factors and a spillover from outside markets also played a role.
Nearby May cotton settled up an even penny, or 1.26%, at 80.50 cents per
pound on ICE Futures U.S. The July contract, which has the most open positions,
finished 1.03 cents, or 1.27%, higher at 82.12 cents.
"It appears to be mostly speculative buying," said Sharon Johnson, senior
cotton analyst at First Capitol Group in Atlanta. "News about China's
first-quarter growth this morning may have spurred the specs to do some
buying."
China reported year-on-year growth in gross domestic product of 11.9%. Strong
economic growth in turn portends strong demand for commodities.
However, Johnson said, a price rise could hurt sales of U.S. cotton in the
export market. "We're going to be too high priced with the rally on Tuesday and
again today," she said.
Independent cotton analyst Mike Stevens tied some of the gain to technically
oriented buying.
Also, some buying appeared to be from mills that needed to fix prices at
lower levels, said Stevens. When mills buy from merchants, they have the option
of setting the price then or at a later date. The latter creates potential
buying.
"Mills have been taking advantage of every dip to get some of their purchases
fixed," Stevens explained.
Spillover support also came from outside markets, Stevens said. Equities were
slightly higher as cotton was closing.
Johnson put the nearby resistance in July cotton around 82.50 to 83 cents.
ICE daily cotton stocks increased by 26,137 500-pound bales Wednesday to
total 886,502 bales, with 66,166 bales awaiting review, according to exchange
data.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 2,077 positions Wednesday to total 187,948, according
to exchange data.
Close Change Range
May 80.50c up 1.00c 79.07-80.99
July 82.12c up 1.03c 80.77-82.35