NYBOT cotton futures rose Thursday but held below the previous day's 12-week high as traders waited to see whether Hurricane Frances, which was bearing down on Florida, would drench cotton farms to the north.
Traders played down the immediate threat to the crop. But they were worried about having to wait an extra day to react to any damage from the storm, because US financial markets will be closed on Monday to observe Labour Day.
"We are waiting to see what it does. The last track says it comes to the south-eastern cotton belt, which is Georgia and Alabama. Over the years those things really do more psychological damage than physical damage," said Keith Brown of merchant Keith Brown and Co in Moultrie. Georgia.
Key December cotton ended at 54.58 cents a lb, up 0.67 from Wednesday's settlement. It traded from 53.00 to 55.50 cents. March rose 0.77 cent to 55.76 cents.
Frances, a huge category 4 hurricane packing winds of 145 miles per hour, was heading toward southern Florida and could then track up the coast toward the cotton-rich state of Georgia. Heavy rains falling on open cotton bolls pose a significant risk to yields and quality.
"Given that it is forecast to hit Florida sometime Friday afternoon and that the markets are closed on Monday of the coming week (Labour Day holiday), traders who are inclined to sell are likely to hold off until Tuesday, and this should be supportive to cotton futures," said Flanagan Trading Corp.
Another supportive influence was the USDA's weekly export sales report. The USDA said that net upland sales were 205,800 running bales, up 78 percent from a week earlier. Exports of 171,700 RB were 6 percent above the previous week but 29 percent under the prior four-week average.
"Export sales were above expectations as were shipments and this is supportive in that it shows strong demand for cotton from countries other than China," Flanagan wrote in its morning commentary.
On the charts, Brown noted that December cotton posted an "inside day," meaning that its high and low levels were within the previous day's range.
"We have not made a new high for the move. By next Tuesday it's going to be too late to sell or buy," he said. "If you want to take a position in this market as a hedger, if you want to buy some puts or protect yourself on this nice rally, you've got to do it this week."
Flanagan said resistance in the December contract was at 56 cents and support at 52.85.
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