Cotton futures finished on Tuesday at a two-month high due to commercial and speculative buying, with brokers saying the momentum from the rally could shove fibre contracts up further this week. New York Board of Trade's open-outcry July cotton contract rose 1.76 cents to end at 51.75 cents per lb, dealing between 50.60 and 51.95 cents.
Based on the spot month charts, it was the highest close for cotton since early April. The new-crop December cotton contract jumped 1.53 to 57.38 cents. The rest increased from 1.35 to 2.60 cents. IntercontinentalExchange's NYBOT electronic cotton platform showed the July contract up 1.76 cents at 51.75 cents at 2:31 pm EDT (1831 GMT).
"There's a lot of hope the market's turning around," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, adding the market's strong close meant there is "plenty of upside room" for cotton contracts. Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said merchant buying on the electronic platform steadily drove cotton up before the pit opened.
Traders said the catalyst for the surge was talk that a merchant had to come in and cover possible export business, with some saying it may be Chinese mills and others less certain.
They said that while merchant buying set the stage for the rally, the last 1.00 cent move higher in cotton was spurred by speculators forced to cover positions and touching off automatic buy orders in the process.
Brown said the new-crop December contract, which should soon be the benchmark as open interest expands from investors getting out of positions in the July contract, is getting into position to make a run to the 60-cents area.
Analysts said the market will wait for a pair of key government reports to be handed out this month. One is the US Agriculture Department's monthly supply/demand report on June 11 and the other is the USDA's plantings data on June 29.
Broker Flanagan Trading Corp sees resistance in the July contract at 52.25 cents, with support at 51.60 and 50.90 cents. Floor dealers said final estimated open-outcry volume stood at 21,000 lots, up from the prior total volume of 15,550 lots. Screen trade Monday was at 12,121 lots, NYBOT said. Open interest was at 225,151 lots as of June 4, down 1,731 lots from the previous session.