Cotton futures closed fractionally higher Thursday as investment fund buy-backs late in the session pared market losses caused by a firmer dollar, brokers said. Any losses in fibre contracts were apparently used by investment funds to plow more money into cotton despite harvest pressure and weak demand, they said.
The December cotton contract added 0.17 cent to settle at 68.55 cents per lb, dealing from 67.27 to 68.61 cents.On Wednesday, the contract closed at 68.38 cents in the loftiest finish for cotton since late August 2008. December contract volume reached 8,123 lots at 2:39 pm EDT (1839 GMT).
March cotton rose 0.07 cent to settle at 70.68 cents, trading between 69.60 and 70.70 cents. Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said cotton has taken its cue almost exclusively from the gyrations of the dollar. The US unit staged a rebound on Thursday after sinking to its lowest level in over a year, causing losses in most commodity markets.
Cotton defied the trend on fund buy-backs, dealers said. Investors continued to expand their positions in cotton, with open interest in fibre contracts standing at 178,718 lots as of October 21. Over the past two weeks, open interest in cotton has expanded by 40 percent as investors plunked money down on the market.
Fundamentally, there is no apparent reason for the spike in cotton futures. If anything, demand has shrivelled as spiralling futures drive potential buyers to the sidelines. This could be gleaned from the US Agriculture Department's weekly export sales report. USDA said total US cotton sales reached 72,600 running bales (RBs, 500-lbs each), from sales in last week's report of 100,200 RBs.
US cotton export shipments stood at 122,300 RBs, from 221,300 RBs in the USDA data of last week. Brokers Flanagan Trading Corp put resistance in the December contract at 69.35 and 70.10 cents, with support at 68.40 and 67.50 cents. Total cotton volume traded declined to 11,847 lots from the prior tally of 15,903 lots, ICE Futures US said. Open interest stood at 178,718 lots as of October 21, up from the prior count of 173,639 lots, the exchange said.