NEW YORK (Dow Jones)--Cotton prices bounced Friday as traders took profits as
bearish economic sentiment dogged most markets.
Nearby cotton for October delivery settled 1.44 cents, or 2%, higher at 79.96
cent a pound on ICE Futures U.S. The most actively traded December contract
settled 0.49 cent, or 0.7%, higher at 73.96 cents a pound.
Many fund traders backed out of positions in commodities and equities
markets Friday in order to avoid risk. Data reflecting weak consumer confidence
and bearish earnings from corporations sent traders into the safe-haven dollar.
Soy, crude and metals prices were lower as a result of risk aversion.
But in cotton, traders that held short positions bought back those preciously
sold lots to exit exposure, said Ron Lawson, managing director at LOGIC
Investments in Sonoma, Calif.
December cotton, where trading volume is currently centered, has been
trending weaker since June 30, when the U.S. Department of Agriculture pegged
its estimate U.S. acres planted to cotton nearly 20% than last year.
"People are reluctant to step into this market on the buy side because the
crop just keeps getting bigger," Lawson said.
The USDA expects domestic cotton output will grow by 50% from last year to
18.30 million 480-pound bales. Planting and production have vaulted higher, in
step with soaring prices. Cotton futures hit two-year highs in April as world
textile demand rebounded with the economy. The U.S. is the world's No. 3 cotton
producer and top exporter. However, economic growth is once again in question
and some traders express pessimism that the huge crop will be in demand. The
fall harvest from India, the world's No. 2 cotton producer behind China, is
also expected to be larger.
Buying at lows from commercial cotton traders will minimize losses, said
Peter Egli, director of risk management at Plexus Cotton Ltd. in Phoenix.
ICE daily cotton stocks decreased by 55,185 500-pound bales Thursday to total
145,841 and 51,816 decertification orders, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 244 positions Thursday to total 153,636, according to
the exchange.
Volume was estimated at 12,134 lots. In options, approximately 3,649 calls
and 3,649 puts traded, according to exchange data.
Close Change Range
Oct 79.96 +1.44 78.52-80.78
Dec 73.96 +0.49 73.13-74.25
Mar 74.81 +0.41 74.00-75.07