Cotton futures rallied to a strong finish on Wednesday, reversing early declines when bullish funds and speculators decided to buy dips after a day-and-a-half sell-off, traders said.
"The market held around 65 cents and then started back up. When it went into positive territory, grains were rallying, corn, soybeans, wheat were rallying. It appeared that fund buyers came in and trade was a scale-up seller," said Mike Stevens of Swiss Financial Services in Mandeville, Louisiana.
The New York Board of Trade's key December cotton contract finished 0.69 cent higher at 66.39 cents per lb, after trading from 65.20 to 66.48 cents. March rose 0.75 cent to end at 69.30 cents. The rest all settled with strong gains of 0.50 to 1.00 cent.
The IntercontinentalExchange NYBOT electronic cotton market showed the December cotton contract up 0.47 cent at 66.17 cents by 3:28 pm EDT (1928 GMT). Its range spanned 64.99 to 66.50 cents. Many market observers have been watching December cotton race up to successive highs dating back to March 2004, wondering when a correction of the steep rise would occur.
In early Wednesday business, December cotton had corrected 380 points off the 3-1/3 year high at 68.80 cents set Monday. It then turned to rally along with other agricultural commodities as bulls grabbed cotton at the low.
"My guess is that when we went to the plus side and the grains started rallying, it was a sign to the speculators that the (downward) correction was over. And they came in and started buying it on a real steady basis," said Stevens.
By the close, cotton pulled up off its 11-day low to close near session highs. On Thursday, the US Department of Agriculture will issue its weekly cotton export results. Though the 2006/07 crop season is nearly over, some analysts will look to the export figures to try to gauge demand from US trading partners.
Open interest in December declined by 2,974 lots to 164,252 lots as of July 17. Overall, open interest in the cotton market fell 2,374 lots to 220,635 lots as of July 17. Brokers Flanagan Trading Corp see support for the December contract at 65.90 cents, with resistance at 66.75 and 67.50 cents.
Volume in the open-outcry pit on Wednesday stood around 16,000 lots, against the Tuesday tally of 11,325 lots. Screen business on Tuesday reached 22,233 lots and total volume hit 33,558 lots.
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