ICE cotton futures rallied to their highest levels in more than a month on Tuesday, after a US government report lowered expectations for output in top producer India and continued rains in US growing regions contributed to supply concerns.
Technical buying also accelerated gains after the rally triggered automatic buy-stops above the prior week's high at 62.45 cents a lb. The December contract also eclipsed its 50-day moving average, at 62.75 cents a lb, for the first time since late August.
The US Department of Agriculture's (USDA) attache in India released on Monday after the market close said that the country's 2015-16 output would be 28.5 million 480-lb bales, below the USDA's official projection of 29 million bales, as low rainfall during the monsoon season would stunt crops and harm yields.
"The Indian crop has to be smaller than a year ago - there's less acreage and the monsoon wasn't as good," said Rogers Varner, president of Varner Brokerage in Cleveland, Mississippi. The USDA's unexpected reduction in its forecast for the US crop in last Friday's supply and demand report continued to support the market, with more rains in the Carolinas in recent days adding to traders' concerns about supply, traders said.
Spillover from gains in other commodities markets, particularly soybeans, amid a weakening US dollar also helped boost prices. "It's a green day for the ags," said Louis Rose, an independent cotton trader and analyst with Risk Analytics in Memphis, Tennessee. Cotton contracts for December rose to settle up 2.17 cents, a 3.5-percent gain, to 63.86 cents per pound. It traded within a range of 61.53 and 64.16 cents a pound.
Certificated cotton stocks deliverable as of October 12 totalled 43,224 480-lb bales, unchanged from the previous session. The New York average basis price for cotton for December fell by 0.15 cent, or 0.25 percent, to 59.94 cents a pound.
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