Cotton futures closed higher Thursday on active short covering in July ahead of deliveries that begin on June 25, analysts said. The spot July cotton futures climbed the 3.00 cent daily limit to close at 78.09 cents per lb. The session low was 74.66 cents. The key December cotton contract on the ICE Futures US exchange rose 0.19 cent to finish at 70.60 cents per lb, dealing from 70.01 to 73.08 cents.
The spread between July and December is at its widest since June 2011, according to Thomson Reuters data. Volume traded on Thursday reached over 47,300 lots, almost double the 30-day norm, it said. Market participants said a large cotton trading house has put pressure on players holding short positions in July to exit those positions.
"They did not give the other side a chance to roll out and this is forcing those who are short in July to buy and cover their shorts," a long-time trader said. Trading is normally intense in the cotton market in the run-up to the first notice day for deliveries. The notice day for the July contract is on June 25 and most investors or speculators would want to avoid delivering cotton against the contracts.
The US Agriculture Department's weekly export sales report showed China bought 744,200 running bales (RBs, 500-lbs each) of upland cotton, some 94 percent of the total 795,700 RBs sold in the last week. Open interest in the cotton market, an indicator of investor interest, amounted to 195,136 lots as of June 13, ICE Futures US exchange data showed.
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