NYBOT cotton futures finished at a four-week high Tuesday on speculative fund and automatic buy orders triggered in part by news that funds are overly short and the market has digested the bearish impact of large crops in the US, dealers said.
Key December cotton soared the 3.00-cent limit to end at 47.32 cents a lb. The days low was at 44.06 cents. It was the highest close for cotton on a spot basis since concluding at 48.18 cents on July 21, 2004.
March likewise increased the 3.00 cents limit to finish at 48.70 cents. Back months went up from 2.55 cents to 3.00 cents.
"We finally got all of our bearish news for the time being," said Sharon Johnson, cotton expert for Frank Schneider and Co Inc in Atlanta, Georgia.
The surge was triggered in part by news of the New York Board of Trades weekly spec/hedge report which showed funds net short by 40.4 percent in the market, prompting speculators to cover their positions.
"The market showed an inability to follow-through to the downside after the seemingly extremely bearish USDA (US Department of Agriculture) supply/demand report last Thursday," Mike Stevens of Swiss Financial Services in Mandeville, Louisiana, said in a report.
That report said the US cotton crop in 2004/05 would hit 20.18 million (480-lb) bales, which would be the second-biggest cotton harvest on record.
Analysts said that when the fund buying powered December past key technical targets, futures sprang higher as a result.
"The market exploded with fund buying, as well as spec and trade short-covering," said Stevens.
Johnson said automatic buy-orders were triggered when December sped past 44.50 and then 45 cents. A leap past last weeks high of 46 cents spawned another round of buying, dealers said.
Analysts said support in the December contract would be at 44 and then 43 cents. Resistance is said to be at 48 and 49 cents.
Floor dealers said estimated final volume amounted to 13,500 contracts versus Monday's tally of 4,503 lots. Open interest rose 90 lots to 79,638 lots as of August 16.