Cotton futures surged on speculative fund buying to finish higher on Monday as worries over a cut in cotton acres in 2008 due to steep rallies in corn and wheat stoked the market's advance, brokers said. ICE Futures open-outcry December cotton contract increased 0.82 cent to close at 64.43 cents per lb, trading from 63.35 to 64.63 cents.
It was the highest close for the contract in 1-1/2 months. March cotton added 0.79 cent to 67.43 cents. The rest increased from 0.50 to 0.90 cent. The ICE electronic cotton market showed the December contract 0.82 cent higher at 64.43 cents at 2:53 pm EDT (1853 GMT), moving from 63.37 to 64.61 cents.
Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said cotton is up for the 6th day running and is "attracting fresh speculative money." The US Agriculture Department, in its annual plantings report last June, estimated US 2007 cotton sowings at an 18-year low of 11.058 million acres.
Analysts said the rally in wheat to an 11-year top and anticipated strong corn sowings in 2008 due to robust demand for ethanol may again hit cotton acreage next year.
That has stoked the influx of commodity fund buying into cotton, but other dealers said the problem with that scenario is that demand for cotton may falter if prices go higher and mills opt to use synthetic or blended fibres instead.
Scale-up trade sales sought to blunt the market's advance, but the weight of fund buying may eventually lift cotton prices beyond 65 cents, basis the key December contract.
"We're getting a bit overbought, but that may not matter to funds. Everybody is focusing on smaller acreage for cotton, but that is the bullish argument for cotton and it is not complete," a trader said.
Open-outcry cotton volume Friday was 5,658 lots, while screen business reached 16,259 lots. Open interest in the cotton market rose 903 lots to 211,751 as of September 14. Broker Flanagan Trading Corp said it saw resistance in open-outcry December cotton at 64.85 and 65.60 cents, with support at 64.05 and 63.25 cents.