Cotton futures surged to a strong close Monday on persistent speculative buying and talk over the weekend of a rise in domestic Chinese cotton prices, brokers said.
The New York Board of Trade's key December cotton contract sprang up 2.03 cents to conclude at 55.66 cents a lb, ranging from 54.50 to 56.55 cents. March jumped 1.70 to 57.10 cents. The rest increased from 1.05 to 1.60 cents.
Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said speculative short-covering off the bat and talk of stronger values in China's cotton market fuelled the advance.
Traders said automatic computer-generated buy orders catapulted cotton higher once the benchmark December contract surged past 55 cents.
"Locals aggressively jumped in front of buying, taking prices almost (the 3.00 cents) limit up before slowing down," Stevens said, adding trade accounts turned into steady sellers once the key December contract raced past 56 cents.
Dealers said the focus of the market will be on the release this week of the monthly supply/demand report by the US Department of Agriculture.
The market players will be looking at the level of global cotton demand and any updates on the Chinese cotton crop since this will affect purchases by the Asian giant, the world's biggest consumer of cotton.
"Demand, as usual, will be key. If demand absorbs all the cotton coming out, we shouldn't pull back so much," a dealer said.
Last month, the USDA reduced its estimate for Chinese cotton production in 2005/06 to 25.5 million bales from the previous month's 26 million bales. Chinese cotton imports were seen up to 14.3 million from 14 million.
Technicians put resistance in the December cotton contract at 56 and 56.55 cents, with support at 55.35 and 54.50 cents.
Floor dealers said estimated final volume amounted to 20,000 lots, up from Friday's tally of 4,421 lots. Open interest rose 162 lots to 111,668 contracts as of October 7.