NEW YORK: ICE cotton rose on Monday for a third straight session, on buying by investors worried about the supply outlook due to unfavorable crop weather in the United States, the world's top exporter of the fiber, dealers said.
The most-active July contract on ICE Futures US rose 0.96 cent, or 1.1 percent, to settle at 87.39 cents per lb.
Cotton traders worried about drought conditions in Texas, the country's top growing region. Those worries componded last week's concern about too much rain that has delayed cotton planting in the Southeast.
"Within the next five weeks, we need to get rain in Texas. It's a roll of the dice, (as) we plant so much of the US crop in a drought-stricken area," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
The dry weather has caused growers in some parts of the state to hold off planting until later in the season, and has created a weather-related risk premium, dealers said.
The delays will affect the upcoming 2013/14 crop, but also could strain the current year's supplies if they are needed to extend far past the crop year-end in July, traders said.
Dealers said they were eyeing the US Department of Agriculture's (USDA) monthly crop report on Friday for any changes in the supply and demand forecasts.
"Demand in light of continued strong export data should be boosted again, the only question being by how much," said Sharon Johnson, cotton specialist for Knight Futures, projecting that US exports will be 13.3 million bales in 2012/13, compared with the USDA's April outlook of 13 million 480-lb bales.
Last week, US government data showed total export sales at the highest since mid-January and export sales to China at the highest since September.
China, the world's largest textile market, began building its strategic reserves in 2011, paying above global prices to support domestic farmers. The stockpiling program is expected to continue this year.
The country is expected to hold more than half of the projected record global inventory by the end of the crop year, though those stocks are considered unavailable to the global marketplace.
ICE will raise initial margin requirements to $1,800 from $1,600 for hedging customers and to $1,900 from $1,760 for all other customers, effective with the opening of business on Wednesday, May 8, the exchange said in a notice on its website.
Exchanges generally increase margins to mitigate price volatility.
The move was "a reflection of what went on with last week's volatility," said Johnson, who said that the size of the increase was relatively small and would likely have much effect.
Last week, cotton prices surged more than 4 percent on Thursday after falling the most in nearly a year during the previous session.
Open interest totaled 168,057 contracts on Friday, according to ICE data, climbing for a fifth straight session after falling to the lowest level since December.
Speculators drove a first-quarter rally of 18 percent as they boosted their bullish bets in cotton futures and options to a five-year high in March.
As they have cut back that net long position, prices have slumped. Spot prices are down more than 9 percent from a one-year high of 93.93 cents a lb touched in mid-March.
Certified stocks totaled 494,884 bales on Friday, ICE data showed.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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