Cotton futures inched higher on Thursday, finishing at a four-week top on investor buying, but brokers said the surge seemed to be petering out and fibre contracts may pull back. Dealings could also slow as top world consumer China goes on holiday to celebrate Lunar New Year and investors complete unwinding positions before March goes into delivery next week, they said.
The key March cotton contract rose 0.10 cent to end at 72.92 cents per lb, moving from 72.26 to 73.26 cents. It was an inside day since the range was within Wednesday's 71.54 to 73.91 cents band. It was the highest finish for cotton on the spot daily charts since the middle of January. Volume in the March contract hit 9,667 lots at 3:05 pm EST (2005 GMT).
The most-active May cotton contract gained 0.18 cent to conclude at 73.81 cents. "It's right at a level that has stiff overhead resistance," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana. He said it would be tough for the market to sweep higher and into the 74 and 75 cents area, basis the May contract. But analysts said any attempt to sell the market off would run into significant support from mills waiting for any break in futures, dealers said.
The level of consumer buying has also dried up given the surge in values although that will not show up immediately in the US Agriculture Department's weekly export sales report on Friday. Cotton brokers said they expect total US cotton sales to range from 350,000 to 450,000 running bales (RBs, 500-lbs each), from 668,800 RBs in last week's report.
"I think the market has left demand behind," one said. Brokers Flanagan Trading Corp sees resistance in the March contract at 73 and 73.90 cents, with support at 72.25 and 71.25 cents. Total volume traded Wednesday hit 66,065 lots, against the previous 58,159 lots, according to data from ICE Futures US Open interest in the cotton market stood at 161,222 lots as of February 10, down from the prior count of 164,093 lots, the exchange said.
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