New York cotton settles mixed

Cotton futures finished mixed Tuesday on switch trade and covering in the spot month by small speculators, with more switch business seen since the spot contract goes into delivery next week, brokers said.
The New York Board of Trade's December cotton contract rose 0.73 cent to close at 48.56 cents per lb, dealing from 47.79 to 48.73 cents. March shed 0.05 to 51.77 cents. The rest ranged from 0.17 cent firmer to 0.05 cent lower.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said small speculators who were betting on the spread, which is the difference between the spot December and second position March contract, to widen out were forced to "run for cover" when it failed to do so.
"It's all due to the spreading," she said, adding the process of rolling positions out of spot December and into the back months will be a top feature of business over the next few days.
Open interest in the December contract sank 8,371 to 45,714 lots as of November 13, while interest in March surged 10,772 to 95,615 lots. December goes into first notice for deliveries on November 22, right before the long US Thanksgiving holiday. The contract expires on December 6. Analysts said the fundamental outlook for cotton remains bearish especially with production increasing and imports decreasing from top consumer China.
"Thus far, demand for US cotton has not been large enough to create additional problems but once Chinese mills 'iron out' their problems with old versus new quotas that will change," Johnson said in a report.
She forecast "the March contract to approach and possibly take out 50.00 cents, (but) I do not look for it to seek the same level as December should business improve and the threat of smaller cotton area into 2007/08 becomes clearer."
Brokers Flanagan Trading Corp sees resistance in the December contract at 48.75 and 49.30 cents, with support at 48.05 and 47.50 cents. Floor sources said final volume hit around 50,000 lots, versus the previous tally of 61,464 lots. Open interest rose 4,379 lots to 176,551 contracts as of November 13.