Cotton futures finished higher on Wednesday on speculative buying inspired by strength in other commodity markets, but the failure to extend the advance at its highs prompted late liquidation in the ring, brokers said.
ICE Futures' open-outcry March cotton contract rose 0.57 cent to end at 68.67 cents per lb, moving from 68.50 to 69.90 cents. May cotton added 0.63 to 70.56 cents and the new-crop December cotton contract ent up 0.46 cent to 77.04 cents. ICE March electronic cotton futures was up 0.50 cent at 68.60 cents at 3:11 pm EST (2011 GMT), moving from 68.10 to 68.89 cents.
"This was strictly following the outside markets," said Mike Stevens, an analyst for broker SFS Futures in Mandeville, Louisiana, referring in particular to early rallies in the grains market, which petered out late. The initial wave of buying in cotton appeared to stem from speculative fund and option-related accounts, with commercials net sellers in futures, he said.
Once the recent top of 69.25 cents, basis March, was pierced, automatic buy orders kicked in to power the market to ever higher ground, dealers said. But the move fizzled out and, when that happened, cotton sharply pared its gains, they said. Analysts said the market may just hover around its current levels until release of a pair of reports on Friday. The first would be the monthly supply/demand report from the US Agriculture Department and the next would be the annual potential plantings survey by the National Cotton Council of America. Traders said the attention of the market would be firmly on the NCC data on potential US cotton plantings in 2008, which are expected to be down to a 25-year low after steep rallies in grains prompted American farmers to switch out of cotton.
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 Tuesday was 5,011 lots and screen business was 17,904 lots. Open interest in the cotton market fell 992 lots to 279,027 lots as of February 5, exchange data showed.