ICE futures U.S. cotton rebounded from a previous session sell-off to settle
higher on Wednesday.
Most-active March cotton settled 43 points higher, at 73.55 cents per pound.
May settled at 74.73 cents, up 43 points on the day. Traders said fund buying
was a feature of the session and a good line of support remains around the 73
cent to 73.10 cent level for March cotton.
Sharon Johnson, senior cotton analyst at First Capital Group, said mill
buying also added to cotton's upside on the day after the market faced swift
selling on Tuesday, ahead of the release of a CFTC investigation report that
concluded that the sharp price rally at the beginning of March 2008 was not
caused by market manipulation.
Johnson added though that if "cotton does not regain its legs within the next
day or two, (speculators) may bail on more of their longs."
Sterling Smith, market analyst at Country Hedging, said some nervousness and
downside pressure may be seen in the marketplace ahead of the U.S. Department
of Agriculture's January cotton supply and demand report due out Jan. 12.
John Flanagan, of Flanagan Trading Corp., forecasts that the USDA will report
cotton production at 12.49 million bales, mill use at 3.4 million bales and
exports at 11.2 million bales, reducing ending stocks to 4.2 million bales. "If
our numbers are correct, the report will be seen as modestly friendly to
prices," said Flanagan.
In a daily report, Commerzbank said cotton futures were the clear
"outperformer" of the agricultural commodities in 2009, with prices gains
exceeding 50%. While demand, particularly in Asia, remained robust, supply
declined, the bank noted. Acreage in the U.S., the largest cotton exporter
worldwide, shrank to a 25-year low of 9 million acres in 2009.
"This year, the supply situation is likely to improve and the seed and
fertilizer producer Monsanto expects that the U.S. acreage will expand to
between 10 and 10.2 million acres, which will slow a price increase in cotton,"
said the bank.
Meanwhile, Analytical company Informa Economics projects 2009-10 U.S. cotton
production at 12.3 million bales, down 292,000 bales from the U.S. Agriculture
Department's December forecast, traders said.
The all-cotton yield is estimated at an average 764 pounds per acre, down 18
pounds from last month and 49 pounds below last year's average. The bulk of the
reduction is expected to come from Texas and Georgia, with slightly lower
output projected for Florida, Alabama, Tennessee, Mississippi and Arkansas.
ICE Settle Change Range (at time of
settlement)
Mar 73.55 up 43 pts 73.15-74.27
May 74.73 up 43 pts 74.28-75.47