Cotton futures settled higher on Tuesday on investor short-covering as the market rebounded from an early fall to a 15-month low, and analysts said the market should consolidate in the days ahead. The key March cotton futures rose 1.40 cents, or 1.5 percent, to end at 92.75 cents per lb, near the top end of its 88.50 to 92.94 cents band.
The session low in March of 88.50 cents is the lowest intra-day level for cotton's second position contract since the start of September 2010, Thomson Reuters data showed. Total volume traded Tuesday was over 17,600 lots, a quarter under the 30-day norm, preliminary Thomson Reuters data showed.
Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas, said cotton broke down early on follow-through investor sales stemming from Monday's weak close. "It (cotton) came right back," said Moss, adding the charge was led by speculators piling back into fibre contracts after March held its session lows. "The market was overdone to the downside."
Moss now believes the March cotton contract has enough momentum to make a probe of 94 cents. Traders said cotton futures has been supported by buying from China, the world's top producer and consumer of cotton, over the past few weeks. In the last three weeks, the US Agriculture Department's weekly export sales report said China has bought over 2.3 million running bales (500-lbs each) as it replenished state stocks which have been run down to keep domestic prices stable.
Open interest in the cotton market, usually taken as an indicator of investor exposure in the market, stood at 136,573 lots as of Monday, from the prior session's tally of 137,009 lots, exchange data showed. Total volume traded Monday in the market reached 12,078 lots, from the previous tally of 8,547 lots, ICE futures US data said.
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