Cotton futures settled higher Wednesday on technically inspired speculative buying, but the market may consolidate Thursday before Friday's release of a government crop report, brokers said. The New York Board of Trade's May cotton contract climbed 0.89 cent to close at 54.48 cents per lb, trading from 53.30 to 54.75 cents.
One contract aside, the rest went up from 0.43 to 0.78 cent. The IntercontinentalExchange's NYBOT electronic market for cotton showed the May contract up 0.86 cent to 54.45 cents at 2:44 pm EST (1944 GMT), dealing from 53.30 to a contract high of 54.75 cents. Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said that March traded under and then broke over the Tuesday low of 53.35 and then the high of 53.75 cents.
Once March surged past last week's high of 54.07 cents, that represented what technicians call an "outside range reversal" and induced speculative funds to buy the market, he added. Frank Weathersby, an analyst for brokers Affinity Trading in Fort Walton Beach, Florida, said the technical buying in cotton was bolstered by "strength in other commodity markets," alluding specifically to the surge in grains prices in Chicago.
Traders said the market also triggered automatic buy order stops once March got past 54 cents, but that trade sales capped the advance at its session peak. Aside from the USDA monthly crop report, brokers said they were also looking at the USDA weekly export sales data. The brokers believe total US cotton sales will range between 200,000 and 300,000 running bales (RBs, 500-lbs each), from 164,400 RBs in last week's report.
Once both USDA reports were out of the way, the focus will turn to the USDA's much-awaited potential plantings report being handed out on March 30. Cotton plantings are seen falling sharply from the 15.276 million acres sown to cotton in 2006 due to the sizzling rally in corn futures, which recently scaled a 10-year high.
Brokers Flanagan Trading Corp see resistance in May cotton at 54.90 cents, with support at 54.35 and 53.75 cents. Floor dealers said final estimated cotton volume in open outcry stood at 21,000 lots, from the prior tally of 5,070 contracts. NYBOT said electronic trading volume Tuesday was at 2,596 lots. Open interest in the cotton market fell 81 lots to 205,721 lots as of March 6.
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