Cotton futures rose sharply Monday as the dollar fell, enabling cotton to
bounce with other commodities.
March cotton, which is the contract with the most open positions, settled up
254 points, or 3.81%, to 69.16 cents a pound on ICE Futures U.S. The May
contract finished 253 points, or 3.71%, higher at 70.76 cents.
On Friday, March cotton fell to a three-and-a-half-month low of 66.55 cents
as part of a commodity-wide selloff on dollar strength, with risk aversion in a
wide range of investments due to worries about the European debt crisis. A
strong greenback pressures dollar-denominated commodities by making them more
expensive in other currencies, and vice-versa.
"Most commodities are up today and the dollar is down," said Keith Brown,
principal with Keith Brown & Co. "Europe did not come unraveled over the
weekend with all of this debt concern, although that is still a huge concern."
Thus, with outside markets no longer "blistering negative," cotton was able
to bounce from a technically oversold condition, Brown said. The commodity
might be finally drawing some support from constructive weekly U.S. export data
last week that was overshadowed by the European debt concerns, Brown added.
As cotton was closing, the ICE Futures U.S. March dollar index was down 0.210
point at 80.385. The Continuous Commodities Index was up 6.06 points.
Brown and John Flanagan, president of Flanagan Trading Corp., both cited
short covering in which traders were buying in order to exit positions in which
they previously sold cotton during a large decline late last week.
On first glance, a planting-intentions survey released by the National Cotton
Council Friday might appear bearish since it shows potential for more cotton.
U.S. farmers are expected to plant 10.093 million acres of cotton in 2010, the
first acreage increase for the crop in several years.
Flanagan pointed out, however, that there may be no actual increase after
all.
"The survey was made in early January when cotton prices were almost 10 cents
higher than now, and if that survey were made today, it would probably show a
small decrease from last season's plantings," Flanagan said.
Meanwhile, the NCC said, world production is expected to fall short of demand
in the 2010-11 marketing year. World cotton production is forecast to rise to
113.9 million bales from 102.7 million in the current year, said Gary Adams,
the NCC vice president of economics and policy analysis. However, consumption
should outstrip production by 2.98% and mean a draw on world stocks, he said.
A key focus for the market is the February supply/demand report, which is
scheduled for release Tuesday by the U.S. Department of Agriculture.
Analysts surveyed by Dow Jones Newswires last week look for the USDA to raise
its estimate of 2009-10 cotton exports to 11.14 million 480-pound bales, lower
its 2009-10 U.S. production forecast slightly to 12.38 million bales, leave
domestic mill use unchanged at 3.4 million bales, and lower 2009-10 ending
cotton stocks to 4.20 million bales.
ICE daily cotton stocks increased by 14,270 500-pound bales Friday to total
525,481 bales, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 4,701 positions Friday to total 164,173, according to
exchange data.
Electronic volume as of 2:30 p.m. EST (1930 GMT) Monday was estimated at
41,032 lots. In combined floor and electronic options trading, there were
approximately 9,875 calls and 5,160 puts, according to exchange data.
Close Change Range
March 69.16c up 254 pts 67.10c-69.54c
May 70.76c up 253 pts 68.71c-71.01c