Cotton futures settled on Tuesday near a one-month high on sustained speculative fund buying after the holiday break and the market's momentum may lead to further gains this week, brokers said. The cotton market was shut Monday for Labour Day.
The key open-outcry December cotton contract increased 0.60 cent to conclude at 61.57 cents per lb, moving from 61.25 to 61.85 cents. It was the best performance for the contract since early August. March cotton added 0.34 cent to 64.65 cents. One contract aside, the rest went up 0.20 to 0.58 cent.
The IntercontinentalExchange electronic cotton market showed the December cotton contract up 0.60 cent to 61.57 cents at 2:31 pm EDT (1831 GMT). Frank Weathersby, an analyst for brokers Affinity Trading in Fort Walton Beach, Florida, said investment funds led the buying spree in cotton and small speculators joined the fray when they saw fiber contracts vault higher.
Most of the buying was based on certain price levels being hit on the charts and Weathersby said cotton prices "should continue up" since whatever trade or producer pressure there is have stepped aside for the meantime.
Analysts said recent news of robust sales of US cotton aided sentiment as it seemed to underscore the fact that demand for cotton remained strong in the early weeks of the 2007/08 marketing year (August/July). "This thing could easily get capped when harvest pressure kicks in later this month. But if demand (for cotton) stays strong, then you are going to see prices firm up right along with it," one explained.
Traders said the strength in cotton prices also stemmed from worries that a rally in wheat prices and steady strength in corn values would continue to reduce acreage for cotton in the coming seasons, accounting for the fact the December cotton contract in 2008 would close the session near or above the 70-cents level.
Open-outcry volume in the cotton market on Friday was at 14,137 lots and screen trade was at 27,222 lots. Open interest in the cotton market was at 203,217 lots as of August 31, up 4,177 lots from the previous session. Brokers Flanagan Trading Corp said resistance in the December open-outcry cotton contract at 62 and 62.50 cents, with support at 61.30 and 60.50 cents.