Cotton futures settled steady Friday on late investment short-covering and trade buying as the market rebounded strongly following a sell-off midway through the session, brokers said. The key December cotton contract rose 0.01 cent to finish at 73.59 cents per lb, dealing from 72.23 and 75.20 cents. Volume traded in the December contract stood at 13,226 lots at 2:35 pm EDT (1835 GMT).
"We went to the edge of the cliff and did not go over," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana. He said the key December cotton contract's ability to hold the 72.16 cents, basis December, low of Tuesday may help stabilise fiber contracts. "A close below yesterday's 72.16 low would be an "outside day reversal to the downside" - a fairly reliable technical signal," said Stevens.
The market's finish in positive territory could possibly mean "a loss in downward momentum" for the bear market in cotton, explained Stevens. Cotton futures also derived some inspiration from the strong tone of soybean futures in Chicago, dealers said. Another source of support was the US Agriculture Department's monthly supply/demand report.
USDA reduced its estimate for 2008/09 world cotton ending stocks to 53.24 million (480-lb) bales from the 54.09 million projected last month. It reduced production to 114.94 million from 116.43 million and cut world consumption to 125.91 million bales from 127.16 million.
USDA estimated US 2008/09 cotton production at 14 million bales, from 14.5 million last month. Severe losses in Texas would probably trim this year's crop, analysts said. "When all is said and done, world stocks are down," said Sharon Johnson, cotton expert at First Capitol Group in Atlanta. Now, she said the trade would be looking toward the more detailed USDA supply report in August.
"I don't think there is much doubt that we'll see US numbers are going to be down again next month," she said. Brokers Flanagan Trading Corp sees support in the December contract at 72.50 and 71.65 cents, with resistance at 73.60 and 74.40 cents. Volume traded Thursday hit 12,780 lots, exchange data showed. Open interest in the cotton market rose 459 lots to 221,457 lots as of July 10, exchange data showed.
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