Cotton futures settled higher on Friday on all-around buying sparked mostly by news that a major merchant took most of the deliveries in the spot December cotton contract, which apparently means it sees higher prices ahead, brokers said. The March cotton contract climbed 1.89 cents, or by 4.73 percent, to finish at 41.80 cents per lb, trading between 39.86 and 42.38 cents.
Volume traded in the March contract was at 10,451 lots at 2:43 pm (1943 GMT). The spot December cotton contract rose 1.35 cents to conclude at 40.99 cents, dealing from 39.35 to 41.95 cents. Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said exchange news that a major merchant in Cargill took delivery of 1,652 of the 1,720 lots delivered on the December contract "has long-term implications for higher prices."
Cotton prices have been hammered the past few sessions to a 5-1/2-year low as the prospect of a global recession and weak demand deflated fibre contracts. Mike Stevens, a senior analyst for brokers SFS Futures in Mandeville, Louisiana, said the strength in the cotton market is tied to what Cargill is doing.
Johnson said the next point of interest would be how the deliveries will unfold over the next few days to give the trade an indication of Cargill's position in cotton.
Brokers Flanagan Trading Corp sees support in the March cotton contract at 41.10 and 40.35 cents, with resistance at 42 and 42.95 cents. Volume traded Thursday was at 26,913 lots, according to exchange data. Open interest in the cotton market fell 3,502 lots to 134,545 lots as of November 20, it said.