Cotton futures settled firmer Wednesday on fund short-covering inspired by steadier grains values, with brokers saying further moves depend on what other commodity markets do in the days ahead. The ICE Futures' July cotton contract rose 0.57 cent to close at 71.17 cents per lb, trading from 69.54 to 72 cents.
The new-crop December cotton futures added 0.47 to 79.52 cents, dealing from 77.95 to 80.17 cents. "After running out of selling very early and bouncing back to consolidate around mid-range, cotton traders seem to have finally noticed that all the other row crops are rallying," said a report by Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
"Since cotton has had only two positive sessions in the last eleven, odds heavily favour cotton taking cue from outside markets and following suit," he said, adding the market is "extremely oversold and ripe for a bounce." Investors who had been holding long positions in the cotton market appear to be reducing those holdings and that has kept fibre contracts under pressure since topping out over 90 cents in early March, dealers said.
Analysts said cotton remains dependent on what happens to grains prices in Chicago, and the gyrations in the energy, precious metals, and US dollar among others. Separately, the market will take a look at the weekly export sales report of the US Agriculture Department.
Cotton brokers said they expect total US cotton sales to range from 200,000 to 300,000 running bales (RBs, 500-lbs each) and against sales last week of 176,800 RBs. US cotton shipments are seen ranging from 250,000 to 300,000 RBs, from 284,900 RBs in shipments in last week's data, the brokers said.
Next week, the trade will turn its focus to the monthly supply/demand report from the USDA because it will contain the first look at world supply in the 2008/09 marketing year (August/July). Brokers Flanagan Trading Corp sees resistance in the July cotton contract at 72.50 and 73.35 cents, with support at 71.25 and 70.60 cents. Total volume traded in the cotton market Tuesday was at 21,200 lots, with open interest in the market up 140 lots to 246,090 contracts as of April 29, exchange data showed.