NYBOT cotton futures bounced from limit-down losses to a higher close on Tuesday, as concerns over Hurricane Ivan grew in the aftermath of Tropical Storm Frances which hit cotton crops in the US Southeast over the weekend.
Key December cotton rose 1.17 cents to 52.75 cents a lb, trading from 48.58 cents, its lowest since August 27, to a high at 52.80 cents. March climbed 1.31 to 54.09 cents.
"It was a classic buy the rumour, sell the fact," said Keith Brown of Keith Brown and Co in Moultrie, Georgia. "The market broke on the fact of (Tropical Storm) Frances making landfall, but now the market is rallying on the rumour that Hurricane Ivan is coming."
"A lot of specs and locals were short and got caught short at limit-down, and the market came up on a little bit of trade buying and zip, off we go," Brown said.
Trading was heavy and extremely volatile. Estimated turnover reached about 16,000 contracts.
The market was assessing damage to crops due to heavy rain from Frances over the weekend in growing states like Georgia and Alabama, traders said.
In Georgia, the bolls on the cotton plants have opened, exposing the fibres directly. This poses a significant risk to yields and quality.
"The rains are unwelcome, but damages are likely to be modest and will take a few days to assess," wrote Flanagan Trading Corp in its morning note.
Dealers also would be keeping an eye on Hurricane Ivan, which was approaching the Gulf of Mexico but remained about a week away from landfall, Flanagan said.
Resistance in December cotton was pegged at 52.85, 53.75 and 54.30 cents, with support at 51.00, 50.60, 50.00 and 49.60.
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