Benchmark cotton futures rose on Wednesday, brushing aside negative USDA supply/demand news of a day earlier and returning to the mechanics of rollover period that hit July futures and bolstered the December contract by the close. Nearly 11,000 switches were said to have taken place on Wednesday out of July cotton into the December contract.
"That doesn't include any outright trades that were done," said Jobe Moss of MCM Inc in Lubbock, Texas. The active December cotton contract on ICE Futures US finished up 1.57 cent, or 2.28 percent, at 70.41 cents per lb. It traded between 68.70 and 71.16 cents, its highest since June 8. Wednesday's contract volume was healthy at 19,556 lots. Spot July futures slipped 48 cent or 0.64 percent to end at 75.09 cents. The session marked a technical inside day compared to the previous range, containing a higher low than Tuesday's at 74.25 and a lower high at 76.35 cents.
July volume came to 15,571 lots. The total cotton tally was robust at 38,178 lots and about 26.0 percent above the 30-day norm, though less than the 46,612 lots traded in Tuesday's selloff, Thomson Reuters data showed. Open interest fell by 4,511 lots to 194,240 lots on Tuesday, with the July open interest at 47,763. Brokers said there were about 10,873 July-December rollover trades. Wednesday was the last day for the largest index funds to complete their switches, which drove up the volume. Though roughly 37,000 July contracts remain on the board, they will likely be rolled at a less frenzied pace. The contract expires on July 9.
Moss said, he thought merchants who needed cotton would not likely price it off of spot July, because of a run up of more than 10 cents since it slid to a contract low on June 4 at 66.10 cents a lb. He noted that July cotton got up to 700 points over the December contract as prices climbed off their long-term lows. As July first notice day approaches on June 25, some brokers think there may be speculative players who have been running the July price up to squeeze out anyone who may still be holding a short position. On Tuesday, cotton prices fell after US Agriculture Department's monthly supply report forecast world 2012/13 (August/July) cotton ending stocks at a record 74.51 million (480-lb) bales, up 1.03 percent from last month's estimate of 73.75 million.
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