Cotton futures rallied Monday largely in reaction to moves in outside
markets--a softer U.S. dollar but stronger equities and crude oil.
May cotton, the nearby month which also has the most open positions, settled
up 0.74 cent, or 0.93%, at 80.43 cents per pound on ICE Futures U.S. The July
contract finished 0.68 cent, or 0.84%, higher at 81.64 cents.
Cotton came under some pressure last week in reaction to dollar strength. So
the commodity started a new week rising in part because the greenback softened,
said Sharon Johnson, senior cotton analyst with First Capitol Group.
"Also, stocks are up and crude is up," she said. "Those are the key reasons
why cotton is up."
Shortly before ICE cotton trading ended, the euro was up to $1.3463 from
$1.3417 late Friday. The single European currency rose on the back of a planned
sale of debt by Greece this week, currency analysts said. A softer dollar tends
to help demand for commodities generally by making them less expensive for
holders of other currencies.
Meanwhile, the Dow Jones Industrial Average was up by around 35 points.
Investors appeared more willing to take on riskier assets such as equities as
recent worries about sovereign debt issues in Greece and certain other European
nations eased. Strength in stocks tends to result in improved optimism about
the economy and thus demand for commodities.
May crude was up by around $2 a barrel on the New York Mercantile Exchange.
Other commodities often follow moves in bellwether oil as large speculators
move in and out of them at the same time as crude. Energy analysts tied oil's
gains to the moves in the dollar and equities.
"We had light volume with outside markets playing a role," Johnson said.
There was some buying to even out positions in which speculators previously
sold cotton, Johnson said. Also, there was mill buying below 80 cents in the
May futures and below 81 cents in the July, she added.
She put nearby resistance in May cotton at the 10-day moving average of 81.48
cents late in the session and the 20-day average of 81.33. Support is seen at
Friday's 79.27-cent low, then 78.70.
The key focus for the cotton market, Johnson said, is a Wednesday report on
planting intentions from the U.S. Department of Agriculture.
ICE daily cotton stocks decreased by 413 500-pound bales Friday to total
783,541 bales, with 14,756 bales awaiting review, according to exchange data.
ICE cotton open interest-the number of active positions left at the end of
the session-decreased by 2,284 lots Friday to total 185,839, according to
exchange data.
Electronic volume as of 2:30 p.m. EDT (1830 GMT) Monday was estimated at
11,090 lots. In floor options trading, there were approximately 3,640 calls and
2,026 puts, according to exchange data.
Close Change Range
May 80.43c up 0.74c 79.74-80.85
July 81.64c up 0.68c 80.95-81.98