DJ MARKET TALK: Cotton Sets New Marks As Merchants Cover Hedges

1503 EDT [Dow Jones] - Cotton futures continued their precipitous rise
Tuesday, as merchants abandoned their hedge positions and mill demand showed no
signs of slowing. After prices hit their daily limit the previous two
consecutive sessions and restricted trading activity, participants jumped back
into the market Tuesday, with both the December and March contracts recording
heavy volume. Total volume ended at 52,707 contracts, compared with a normal
pace between 21,000 and 24,000 contracts. Analysts attributed the rise across
both contracts to merchants buying back their hedge positions and exiting the
market before banks demand more margin, or money held as collateral against a
futures position. An increase in margin calls has driven merchants to file for
bankruptcy in the past. ICE December futures settled 4.88 cents, or 3.9%,
higher at $1.2959 a pound, while March cotton hit its daily limit, up 6 cents,
or 5%, to $1.2531.