New York cotton finishes at month-high

Cotton futures jumped on Friday, closing at a one-month high on renewed speculative fund buying, and analysts said the market could punch higher amid worries about a searing drought zapping the US cotton crop.
The New York Board of Trade's December cotton contract soared 1.27 cents or 2.3 percent to settle at 55.46 cents per lb, dealing from 53.86 to 55.60 cents. It was the highest close for the contract since settling at 56.88 cents on June 21.
March gained the same to 58.50 cents. The rest increased 0.38 cent to 1.35 cents. "It looks very positive," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia. The rally was particularly impressive given that most speculators would normally look to end the week by liquidating their positions.
She said the market could be "dialing in" the effect of a withering drought which has hit large parts of the cotton belt in the United States, the world's leading exporter of cotton.
Texas, the country's top growing state, has been hit especially hard. Some analysts feel production could easily drop to as low as 4.0 to 4.5 million (480-lb) bales, from 8.0 million last year.
They added that US cotton production in 2006/07 currently estimated by the government at 20.5 million bales, could fall to 19.5 or even 18.5 million bales.
Traders said that once the key December contract held the Thursday low of 53.85 cents, speculative funds jumped right back in and powered the market to its highs.
Automatic buy orders were touched off on the way up and a move above a key resistance area at 55.50 cents, basis December, could spawn further investment fund buying in the market, they said.
Weather conditions in August as the US cotton belt moves to harvest does not hold much promise either, dealers said. The US National Weather Service said the heat in August will be focused on the southern and central parts of the country, with temperatures well-above normal for eastern Texas, which is also seen getting below-normal precipitation.
Brokers Flanagan Trading Corp sees resistance in the December contract at 55.50 and 56.25 cents, with support at 54.75 and 53.55 cents. Floor dealers said estimated final volume reached 13,000 lots, versus the previous 7,325 lots. Open interest in the cotton market rose 500 lots to 161,451 lots as of July 20.