US cotton futures closed higher Thursday on suspected trade/mill and speculative buying as the market defied losses in other commodity markets and the stronger dollar to march higher, analysts said. ICE Futures US key December cotton contract increased 1.45 cents to close at $1.1571 per lb. The contract traded from $1.1426 to $1.176.
Volume traded in the cotton market stood at 22,147 lots, less than half a percent below the 30-day average at 22,263 lots, preliminary Thomson Reuters data showed. "Cotton is such a bull market it is ignoring" losses in other commodity markets, said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia. Indeed, precious metals, grains and crude values stumbled while the dollar rose. A higher dollar normally pressures commodity products because they are denominated in the US currency.
Cotton prices on ICE Futures US climbed last week to a level that the Mississippi Historical Society said was last seen during the US Civil War from 1861 to 1865. After scaling that high, the market dropped on fund liquidation and profit-taking, but it has since recovered as steady buying from textile mills and speculators who believe the market is headed higher buoyed cotton values.
The market has rallied since July due to tight stocks and strong cotton demand, especially from world No 1 producer and consumer China. Investment funds have turned to cotton because they feel it undervalued and is the next strong performer in commodities. The market was firmer on buying by trade accounts and a lack of sustained selling pressure in the market, added Lou Barbera, an analyst for commodities brokerage VIP Commodities.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, said some "spec business and mill business" pushed the market higher. Another source of support came from the US Agriculture Department's weekly export sales report, dealers said. USDA said total US cotton sales at 600,800 running bales (RBs, 500-lbs each), from last week's 647,000 RBs. Cotton brokers had been expecting total US cotton sales to range from 400,000 to 500,000 RBs.
US cotton futures were also given a boost by steadier prices in the Chinese cotton market. The Zhengzhou Commodity Exchange's May cotton futures was last traded at 24,995 yuan per tonne, up 915 yuan from its previous close. Fundamentally, the cotton market digested a survey that Chinese analysts expect the country's cotton production in 2010/11 to reach 6.45 million tonnes, below the estimate by the US Agriculture Department forecast of 6.976 million tonnes.
That estimate was further underscored by influential industry publication Cotlook, which cut China's 2010/11 cotton production forecast to 6.4 million tonnes. Analysts said the market should begin to see some pressure from next week when investment funds begin to roll the positions forward in the spot December contract as it gets ready for first notice day in deliveries next month.
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