Cotton futures settled higher Wednesday on a steady drumbeat of fund buying as market players cautiously digested a government crop report that fiber demand will remain strong in 2005/06, brokers said.
The New York Board of Trade's key December cotton contract went up 0.73 cent to end at 55.90 cents a lb, in a band from 55.27 to 56.07 cents. March advanced 0.79 to 57.50 cents and the back months gained 0.50 to 0.85 cent.
"The funds are buying it when it dips," said Jobe Moss, an analyst for broker and merchant MCM Inc in Lubbock, Texas.
He said cotton futures may continue to probe areas above 56 cents in December delivery to see if a close above that level will spur further buying from automatic orders that are triggered if futures reach certain price targets in the market.
Analysts said the US Department of Agriculture's monthly supply/demand data was a mixed bag for the market.
USDA cut its forecast for Chinese cotton production in 2005/06 to 24.5 million (480-lb) bales from 25.5 million last month. It upped world cotton consumption to 112.93 million bales from 112.20 million last month.
John Flanagan, an analyst for brokers Flanagan Trading Corp, said the demand figures were "very impressive" because the government was calling for demand to remain strong despite the steep fuel prices.
He said surging crude prices meant synthetic fibers, the top competitor to cotton, was losing ground to cotton in its share of the market.
Mike Stevens of SFS Futures in Mandeville, Louisiana, said cotton values are going to be buttressed by "extremely good demand."
Futures popped higher at the onset of trade on speculative buying and the market's gains were only trimmed by trade sales at the top of the range, dealers said.
Brokers Flanagan Trading Corp pegged resistance in the December contract at 56.10 and 56.75 cents, with support at 55.35 and 54.50 cents.
Floor dealers said estimated final volume amounted to 10,000 lots, off from Tuesday's tally of 10,559 lots. Open interest rose 1,067 lots to 115,657 contracts as of October 11.