NEW YORK, Nov 18 (Reuters) - U.S. cotton futures closed up
the daily limit Thursday, the first time they had risen in
three sessions, as optimism about a possible rescue plan for
debt-ridden Ireland weakened the dollar and gave the market a
boost, brokers said.
Cotton was also bolstered by market belief that No. 1
consumer China would need to import large amounts of fiber and
news an adviser to the Peoples Bank of China said the country
should not rely solely on an interest rate rise to put the
clamps on inflation.
'Ireland is the spark in this,' Sharon Johnson, cotton
expert at First Capitol Group in Atlanta, said. 'It's a macro
(inspired) advance.'
Cotton prices tanked last week on worries over euro zone
debt, which ignited a rally in the dollar and deflated
commodities.
Prices of cotton were also hit hard by fears China may take
stern action to curb inflation running at a 25-month high by
raising interest rates or capping domestic prices with measures
that would crimp commodity demand or drain liquidity from
domestic markets.
The benchmark March cotton contract on ICE Futures
U.S. rose the 5-cent trading limit to close at the session high
$1.2915 per lb, with the session low at $1.2338.
Total volume traded reached around 21,735 lots, more than
40 percent below the 30-day average of 37,655 lots, Thomson
Reuters preliminary data showed.
In China, the Zhengzhou Commodity Exchange's key May cotton
contract last traded Thursday at 27,430 yuan per tonne,
down 45 yuan but above the session low at 26,100 yuan.
The U.S. cotton market is still the top performing
commodity on the Reuters Jefferies Commodity Index, up
more than 70 percent year to date.
(Graphic: http://link.reuters.com/kew48n)
Mike Stevens, an independent cotton analyst in Louisiana,
said cotton prices surged due to strong outside commodity
markets, the lower dollar and in anticipation of robust U.S.
cotton sales in the weekly export data from the U.S.
Agriculture Department.
The USDA's weekly export sales report showed total U.S.
cotton sales at 566,700 (500-lb) running bales, the 8th time in
9 weeks sales have topped 500,000 RBs.
Stevens said the outlook for cotton futures was for
supplies to remain tight and Chinese demand robust going
forward.
'None of the fundamentals have changed,' he said, adding
record high cotton prices hit last week never rationed demand,
as they were supposed to do.
Lou Barbera, cotton expert at brokerage VIP Commodities,
calculated that the strong pace of U.S. cotton sales meant the
U.S. cotton crop would be completely sold before the end of the
Northern Hemisphere winter in March.
'It's getting tighter,' he said. 'There's (still) a lot of
cotton that China needs.'
