Cotton futures rose Monday, continuing the rally that began last week on
bullish chart influences and dwindling U.S. cotton stocks.
Most active December cotton on ICE Futures U.S. rose 1.15 cent, or 1.5%, to
settle at 76.49 cents a pound, near the session peak and three-week high of
76.53 cents.
The outside influences of a weak U.S. dollar and a firm equity market
encouraged speculative buying in cotton, with tight warehouse stockpiles of the
fiber providing continued price support.
Warehouse stocks have fallen to such low levels that traders are uncertain
whether ICE supplies--the fallback for cash market purchases--will be available
before they can be replenished with the U.S. crop.
Rain associated with Tropical Storm Bonnie was not expected to negatively
affect cotton since none of the plants in the southern Delta or the Southeast
had open bolls, said Sharon Johnson, analyst at First Capitol Group in Atlanta.
The boll opening stage occurs when the white fibers of the plant are visible
on at least one boll--the rounded bud part of the plant that houses the cotton
fiber.
Bolls are not expected to open in these regions until early August and then
only in small numbers.
Cotton can be damaged once the boll is open and the fiber is exposed to
repeated rainfall that does not allow the cotton to dry properly. This occurred
last year when the Delta lost 25% of its yield potential because of nearly
continuous storms from August through November, said Johnson.
Fundamentally, traders are staring at a 2010 U.S. cotton crop that is
expected to be as much as 50% larger than last year, as farmers planted more
cotton in response to higher prices and rebounding textile demand.
The Indian monsoon is increasing in intensity, a positive development for the
country's cotton crop.
India's monsoon rains have narrowed to 7% of the long-term average since the
beginning of the rainy season on June 1. The country's monsoon rains had fallen
to 16% below the average in June.
The monsoon season is critical to summer crops like cotton as about 60% of
India's farmland is rain-fed.
ICE daily cotton stocks fell by 1,986 500-pound bales to total 53,403 bales.
The U.S. Agriculture Department said that 1,169 bales had been decertified.
Open interest fell 60 to total 161,671 contracts, ICE reported.
Futures volume is pegged at 21,063 contracts, with 5,559 calls and 2,805 put
options traded.
ICE Close Change Range
Oct 81.22 +90 80.21-81.22
Dec 76.49 +115 73.34-76.53
Mar 75.22 +108 74.15-75.27