Cotton futures powered to a strong finish Wednesday as a fund-led commodity wide rally spilled into fiber contracts and the market could spike higher if investors sustain their buying spree, brokers said. The ICE Futures' May cotton contract rose 1.91 cents to settle at 73.85 cents per lb, trading from 71.80 to 74.25 cents.
The new-crop December cotton futures climbed 1.86 to end at 84.53 cents, in a band from 82.41 to 84.75 cents. "The funds are saying, 'we're back!'" said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana. "All I can see are these strong outside markets. It's the bulls' day out."
The market essentially ignored the monthly US Agriculture Department supply/demand report, which showed both the US 2007/08 cotton crop and world ending stocks going up. News of rains in the key growing state of Texas failed to dampen the rally in cotton, dealers said.
Cotton futures slipped in early business after release of the USDA data, but once crude prices took off and the metals and grains complex followed suit, fiber contracts staged their own rally as well, according to brokers. Stevens said the close in the May contract above 73.50 cents is a good technical signal that may see more buying in cotton, but that a finish above 75 cents would mean a full-scale breakout that would suck in heavy speculative interest.
Separately, brokers believe the USDA's weekly export sales data would see total US cotton sales running from 250,000 to 400,000 running bales (RBs, 500-lbs each) and against sales last week of 270,200 RBs.
US cotton shipments have been lagging though and they are expected to hit between 250,000 to 280,000 RBs, from 248,300 RBs in last week's report. Broker Flanagan Trading Corp sees resistance in the May cotton contract at 74.60 cents, with support at 73.50 and 72.80 cents. Volume traded in the cotton market on Tuesday was at 29,516 lots, with open interest in the market down 1,636 lots to 266,878 contracts as of April 8, exchange data showed.