Cotton futures settled slightly firmer on Friday on investor buying likely tied to options expiration of the March contract while the trade awaits release of a pair of crop reports next week, brokers said. The key March cotton contract increased 0.15 cent to close at 49.86 cents per lb, trading between 49.47 and 50.45 cents.
Volume traded in the March contract was at 10,563 lots at 2:47 pm EST (1947 GMT). The May contract added 0.09 cent to end at 50.43 cents. Most players with positions in options expiration wanted the March contract to hover near 50 cents and this dictated the direction of trading, dealers said. Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said fibre contract players are waiting for news on what kind of plan emerges to help the ailing banking system and a global economy mired in recession.
She added that action next week will be dominated though by the results of two reports. The first would be the US Agriculture Department's monthly supply/demand report. The next would be the potential plantings report by the main industry group National Cotton Council.
Most of the trade expect modest, if any, changes in the USDA's estimate of world cotton supply and demand. "Traders are quite complacent concerning the USDA supply/demand (data), which in itself opens the door for a surprise," cautioned Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
Brokers Flanagan Trading Corp said it sees resistance in the March cotton contract at 50.50 and 51.60 cents, with support at 49.60 and 48.95 cents. Volume traded Thursday reached 16,029 lots, exchange data showed. Open interest in the cotton market was at 128,868 lots as of February 5, from 129,209 lots in the previous session, it said.