Cotton futures finished higher Monday on modest speculative buying but brokers said the market is seen staying in a band while monitoring severe winter weather in key consumer China and while waiting for a key government crop report due out at the end of the week.
ICE Futures' open-outcry March cotton contract rose 0.71 cent to end at 68.87 cents per lb, moving from 68.10 to 68.90 cents. May cotton added the same to 70.79 cents and the new-crop December cotton contract gained 0.78 cent to 77.47 cents. ICE March electronic cotton futures increased 0.56 cent to 68.72 cents at 3:01 pm EST (2001 GMT), moving from 68.07 to 68.95 cents.
Frank Weathersby, an analyst for brokers Affinity Trading in Fort Walton Beach, Florida, said fiber contracts were buoyed in part by the strong tone of grains prices. But he said trade could slow down with Lunar New Year approaching this weekend and due to shut-down business in China, the world's top consumer of cotton. "The main question this week is Chinese New Year," he said, adding the trade is mulling how severe the impact would be of the worst winter to have hit China in a century.
Many investors could also be evening up positions before the release of the monthly supply/demand report from the US Agriculture Department. The market opened at its lows for the session and then gradually worked its way north on speculative buying, traders said.
Cotton futures are likewise seen by investors as undervalued and the market could track sharp rallies in soybeans and wheat, they said. Broker Flanagan Trading Corp sees resistance in the March open-outcry cotton contract at 69.30 and 70 cents, with support at 68.60 and 67.75 cents.
Open-outcry volume Friday was at 8,689 lots and screen business was at 22,352 lots. Open interest in the cotton market jumped 7,582 lots to 278,576 lots as of February 1, exchange data showed.