NEW YORK: ICE cotton gained on Tuesday as investors returned to buying after pushing the market to the largest one-day decline in a week and a half on profit-taking during the previous session, and strong US financial markets supported prices.
The most-active May cotton contract on ICE Futures US rose 1.48 cents, or 1.7 percent, to settle at 88.87 cents per pound.
US stocks rose, with the Dow Jones Industrial average up and S&P 500 near an all-time intraday high.
The financial markets' gains prompted some "sympathy buying" of cotton, said Nick Gentile, senior partner of commodity trading consultancy Atlantic Capital Partners.
Buying spiked during the morning session in New York as automatic buy stop orders were triggered near the 10- and 20-day moving averages, pushing fiber to its intraday high of 89.69 cents, dealers said.
Cotton posted its largest one-day decline since March 20 during the previous session as investors took profits following fiber's recent bull run. Prices surged about 18 percent during the first quarter.
The steep gains were driven by investments from speculators. Noncommercial dealers boosted their bullish bets in cotton contracts to the highest levels in five years last month, though government data on Friday showed they have dialed back that net long stance.
Trading volumes were heavy on Tuesday, bolstered by the index fund roll. Total volume reached almost 35,000 lots, nearly 44 percent higher than the 30-day average, preliminary Thomson Reuters data showed.
Fiber also found support from recent news that China, the world's top consumer and producer, would keep sale volumes from its state reserves steady despite expectations that it would boost sales in a bid to soften high global prices.
"Fundamentally, the cash price is strong, so there's a bullish case there," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors
That sense of tightening supplies outside of China has been seen pushing up New York cotton prices in 2013 after two years of losses.
More than half of a record global surplus forecast by the end of the crop year through July is expected to become part of China's stocks and is considered unavailable to the global marketplace.
Beijing began building its reserves in 2011, paying above global prices to support local farmers.
Traders have said that supply tightness in the cash market has been supporting futures prices, with mills coming in to buy as prices dip in recent weeks.
US export data has been seen as solid, especially in the face of recent high prices. Last month, the US Department of Agriculture increased its estimates for global consumption, citing recent sale and shipment volumes.
The next monthly supply and demand outlook from the USDA is due on April 10.
Despite tight sentiment and the decertification of about 2,160 480-lb bales listed against the exchange, according to ICE data, certified stocks have been climbing to some of the highest levels since June 2010.
Certified stock levels totaled 424,338 bales on Monday, exchange data showed. Another 8,623 bales awaited approval by the USDA on Tuesday.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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