Cotton futures settled firmer on Wednesday on investor buying as the market was buoyed by steadier financial exchanges and a firmer grains complex, brokers said. The key March cotton contract increased 0.42 cent to close at 47.23 cents per lb, trading from 46.65 to 47.72 cents. Volume traded in the March contract was at 6,248 lots at 2:38 pm EST (1938 GMT).
The May contract added 0.54 cent to settle at 47.79 cents. Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, said cotton staged a modest rebound not too far from unchanged levels. He said the next move in cotton still depends on leads provided by grains and sharp gyrations in world equity markets.
A close below the recent low of 45.58 cents, basis March, and prices could revisit the area around 45 cents. A finish over 50 cents and the contract could be targeting 55 cents next, analysts said. The price of soybean futures in Chicago is being closely watched by the cotton market because of the prospect that US farmers may opt to switch away from cotton because of higher returns on soybeans.
A Reuters survey at the annual Beltwide cotton conference earlier this month showed industry participants expect US 2009 cotton sowings to fall to an average of 7.9 to 8.2 million acres, from 9.4 million in 2008. Interviews with industry officials showed that most of the trade feels soybeans are a better option this season.
"Cotton remains locked in a battle for acreage with soybeans in the US and weakness (or strength) in one will make itself felt in the other although soybeans have the upper hand in that tug of war," said a report by cotton expert Sharon Johnson of First Capitol Group in Atlanta, Georgia.
Brokers Flanagan Trading Corp put resistance in March cotton at 48 and 48.95 cents, with support at 47.15 and 46.25 cents. Volume traded Tuesday reached 8,721 lots, exchange data showed. Open interest was 130,358 lots as of January 20 versus 129,917 lots in the previous session.