Most-active December cotton futures ticked slightly higher Wednesday, perhaps
getting a lift when equities recovered from early-day weakness.
Overall, however, activity was described as muted, with much of the focus on
the rollover out of the July contract ahead of first-notice day next week. That
resulted in some selling of the July contract but buying of the December
contract.
Nearby cotton for July delivery fell 0.20 cent, or 0.2%, to settle at 81.77
cents per pound on ICE Futures U.S. Most-active December cotton gained 0.08
cent, or 0.1%, to 79.70 cents.
"We continue to see liquidation occurring in the July contract," said Sharon
Johnson, senior cotton analyst with First Capitol Group in Atlanta. That means
selling to exit positions by traders who previously bought.
In some cases, but not all, traders are then rolling their positions forward.
First-notice day for July cotton is June 24.
"Crude was down and then up. That may have helped cotton, as well as the
stock market coming back," Johnson said. "The three seem to be tied at the hip
these days."
These markets often move together based on economic sentiment, which in turn
affects expectations for demand for commodities. The energy complex was
supported by government data showing U.S. gasoline inventories fell last week,
reflecting improved demand. Equities started lower but then moved back to
steady levels after BP's agreement to set up a $20 billion fund for victims of
the Gulf of Mexico oil spill.
As for cotton news, reports are suggesting "near perfect" conditions for the
U.S. crop, Johnson said.
The market, anticipating a large crop, is awaiting an end-of-June report on
U.S. planting, she said. Meanwhile, export sales due out Thursday are expected
to be down from a week ago due to higher prices, she said. Both have potential
to hurt December cotton prices.
"Next week, we'll start seeing estimates for the upcoming planting report,"
Johnson explained. "That should start putting some pressure on the December.
And if tomorrow's export sales are fairly lousy, that may also pressure the
December to some degree."
ICE daily cotton stocks decreased by 12,483 500-pound bales Tuesday to total
772,096 bales.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 3,808 positions Tuesday to total 172,128, according
to exchange data.
Electronic volume as of 2:30 p.m. EDT (1830 GMT) Wednesday was estimated at
16,893 lots. In floor options trading, there were 3,486 calls and 694 puts,
according to exchange data.
Close Change Range
July 81.77c dn 0.20c 81.61c-82.45c
December 79.70c up 0.08c 79.33c-79.90c