Cotton futures finished near session highs on Friday, ahead of a long US holiday weekend, lifted by a light short-covering rally as some players worried about dry West Texas growing conditions, traders said.
"It was a pretty quiet day - a bit of short covering ahead of the weekend. There may have been some speculative buying, but I think it was mostly short covering to prepare for Tuesday," said John Flanagan of Flanagan Trading Corp.
Many players left early on Friday to make the most of the long US Memorial Day holiday weekend, making for a slow day. US financial and commodity markets will be closed on Monday.
The New York Board of Trade's July cotton contract ended with an 0.88 cent gain at 50.94 cents a lb., and traded in a range from 50.04 to 51 cents per lb.
The new-crop December contract was also 0.88 cent higher by the end at 55.95 cents, in a 55.05 to 55.95 range. Longer-dated cotton contacts settled 0.72 to 0.97 higher.
Traders said many players were troubled by the situation with dry, hot and windy weather forecast for the West Texas and US Southwest cotton growing regions.
A fire warning was issued by the Accuweather forecasting service for the US Southwest area.
"A fire weather watch is in effect from Saturday afternoon through Saturday evening for the Western South Plains and Southwest Texas panhandle due to a combination of gusty winds, low relative humidity, and very high to extreme fire danger," Accuweather said on its Web site
Weather forecaster Meteorlogix also predicted dry conditions with above normal temperatures through Monday in the US Southwest and Texas cotton growing regions.
Traders said the warning underscored how critical the situation was for cotton growers in the area.
"That notice emphasises the seriousness of the problem and how dry it is. When it's dry and windy, what little bit of moisture you may have in the soil, you lose it," said Mike Stevens of Swiss Financial Services in Mandeville, Louisiana.
With dryland planting, he explained, the seed must germinate in top soil, relying on moisture in the ground.
"But the wind dries the soil. The combination of hot, windy weather and dryland planting is not good," he said.
Stevens said he spoke with a farmer in Lubbock, Texas, on Friday who said they saw zero chance of rain on Saturday.
Others were forecasting a 20 percent chance of rain.
"There's an old saying in the market that it always rains in West Texas on Memorial Day weekend. There's a forecast for 20 percent rain, but I think most people don't want to bet on that weather. They like to react to it," Flanagan said.
If, instead, dry, hot conditions persist throughout the weekend, some observers said to expect a rally on Tuesday.
The rule of thumb, traders said, was that Memorial Day was the insurance cutoff date for farmers in Texas to plant their cotton crop and be able to make a claim if the seed fails.
Floor dealers estimated Friday's cotton volume at about 7,000 to 8,000 lots, down from Thursday's turnover at 12,356 lots. Thursday's open interest rose by 502 lots to a total of 175,677 contracts.
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