Cotton closed higher Friday on speculative and fund buying as the market shrugged off a government plantings report that had been termed bearish, dealers said. New York Board of Trade's benchmark December cotton contract climbed 0.50 cent to settle at 54.16 cents per lb, moving from 53.05 to 54.20 cents. The rest went up 0.15 to 0.45 cent.
The US Agriculture Department projected that US cotton plantings in 2006 would reach 15.27 million acres, much higher than trade expectations of 14.38 million to 14.6 million acres.
"It's acting much better than I anticipated," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia. She said the USDA figure had apparently already been partly priced in by most players, diluting its impact.
Analysts said that while US cotton plantings were sizeable, the report was compiled for conditions prevailing as of June 1. Since then, a severe dry spell has taken a toll on cotton farms in places like Texas, the top growing state in the country, and other parts of the US cotton belt.
Another key factor for the market going forward would be the kind of demand that will be seen for cotton in the 2006/07 marketing year (August/July).
Cotton contracts stumbled at the start on speculative sales following the release of the USDA data, but the market quickly shrugged off the data and began moving higher, dealer said.
Mike Stevens of brokers SFS Futures in Mandeville, Louisiana, said the amount of cotton eventually abandoned by farmers will "probably be much larger than the 12 percent they (the USDA) assumed in June but we won't really know anything until the August (USDA monthly supply/demand) report which is the first survey-based report" for the 2006/07 season.
Brokers Flanagan Trading Corp sees support in the December contract at 53.55 and 53 cents, with resistance at 54.75 and 55.10 cents. Floor dealers said estimated final volume reached 24,000 lots, up from Thursday's count of 8,602 lots. Open interest rose 941 lots to 160,577 contracts as of June 29.