Cotton futures banked on speculative fund short-covering and commercial buying to end at a nine-month high on Thursday, and the strength of the rally may lead to further gains over the next few days, brokers said.
The New York Board of Trade's March cotton contract jumped 0.84 cent to close at 55.18 cents per lb, trading from 54.20 to 55.20 cents. It was the highest close for cotton on a spot basis since finishing at 55.45 cents on February 27.
May cotton rose 0.59 to 56.09 cents. The rest were flat to 0.50 cent firmer. Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said a combination of merchant buying and short-covering by commodity funds covering their short positions in cotton fuelled the advance.
She said the move in cotton "certainly suggests" that the next target would be 56 cents in the March contract. With Friday coming up, Johnson said, some profit-taking may curb the market's rally, but the longer-term prospects are positive.
Fundamentally, there was no reason behind the move. The US harvest is practically done except for a few pockets and most of the trade is waiting for clearer signs on demand, especially from top consumer China.
As far as consumption is concerned, the US Agriculture Department's weekly export sales report showed total US cotton sales at 185,300 running bales (RBs, 500-lbs each), up from last week's 136,000 RBs. The figure exceeded trade expectations it would run from 70,000 to 150,000 RBs.
US cotton shipments of previously booked orders reached 191,500 RBs, against 141,600 RBs in last week's report and again topping trade belief it would range from 100,000 to 150,000 RBs.
Brokers Flanagan Trading Corp sees resistance in the March contract at 55.55 and 56.10 cents, with support at 55.05 and 54.50 cents. Floor sources said final volume hit 22,500 lots, versus the previous tally of 10,578 lots. Open interest in the cotton market fell 71 lots to 161,997 contracts as of December 13.
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