Cotton futures finished up but off their session highs Monday as speculators bought the market after Hurricane Katrina slammed into Louisiana, but analysts noted the crop damage may be minimal as the storm weakened and turned slightly east toward Mississippi, market sources said.
"Most of the cotton in Mississippi is in the middle of the state, above Jackson. If the storm hooks eastward away from Jackson, which it looks like it's doing, I think the damage will be minimal," said Keith Brown of Keith Brown and Co in Moultrie, Georgia.
The New York Board of Trade's December cotton contract rose 0.68 cent at 49.14 cents a lb, dealing from 48.25 to 49.70 cents.
March ended up 0.57 cent at 50.87 cents and deferred or back months settled up 0.05 to 0.85 cent.
Hurricane Katrina, an extremely dangerous Category 4 hurricane, with sustained winds of 140 mph, hit Louisiana about 65 miles south-south-east of New Orleans early Monday, the US National Hurricane Center said.
By 1 pm EDT (1700 GMT), Katrina's winds had decreased to 105 mph, a Category 2 storm, with higher gusts and its centre moving ashore at the Louisiana-Mississippi border.
"Had it gone a little further west and the heavy rains encompassed Louisiana and Mississippi along with Arkansas and Tennessee, that would have hit a lot more open cotton than what we are looking at," said Sharon Johnson, cotton expert with First Capitol Group in Roswell, Georgia.
Cotton brokers noted that the market will not know the extent of the damage to the cotton crop for at least a week.
"We always over-estimate the losses, but we've never had a Category 5 hit in this instance, so we may not be over-stating the losses. Are we talking 200,000 bales, or 500,000 bales? We just won't know and we won't know for at least a week to two weeks until the producers can get back into the field and assess the damage," said one.
Looking ahead, one analyst pointed to the weather forecast following Katrina which may help any damage the crop sustained during the storm.
"Looking at the six-to-10 day forecast, we do see below normal precipitation, so once Katrina moves through, the weather will improve to allow cotton to dry out and allow the colour to recover to some degree," he said.
Brokers Flanagan Trading Corp pegged resistance in the December contract at 49.80 and then 50.65 cents, while support was seen at 48.65 and 48.00 cents.
Floor dealers said estimated final cotton futures volume reached 10,534 lots, vs. just 4,567 lots on Friday. Open interest was up 407 lots to 105,152 lots as of August 26.
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