Cotton futures surged to a strong close on Tuesday on investor short-covering as a bullish government crop report buoyed fibre contracts for most of the session, brokers said. The December cotton contract climbed 1.44 cents to settle at 69.05 cents per lb, trading from 67.25 to 69.23 cents. December contract volume reached 15,000 lots at 2:39 pm EST (1939 GMT).
March cotton rose 1.39 cents to close at 72.84 cents, trading between 71.10 and 73.04 cents. The monthly US Agriculture Department supply/demand report reduced its estimate of US 2009/10 cotton production to 12.5 million (480-lb) bales, below a Reuters survey showing an average of 12.69 million bales and the USDA forecast in October of 13 million bales.
Most in the trade had been expecting the crop to be cut by only 200,000 to 300,000 bales. World 2009/10 cotton consumption was raised to 113.52 million bales from 112.64 million, production was cut to 102.74 million versus 103.78 million and world ending stocks reduced to 53.72 million bales against 56.13 million.
"The USDA report was bullish for cotton," said Sterling Smith, an analyst for brokers Country Hedging Inc in Minnesota. Some analysts believe some of the recent steadiness in cotton likely factored in a bullish report. "A large portion of this report is in the market," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia.
Smith said that more rains in the US cotton belt could prompt the USDA to put in another downward revision in the country's cotton harvest. Brokers Flanagan Trading Corp sees resistance in the December contract at 69.35 and 70.05 cents, with support at 68.40 and 67.50 cents. Total cotton volume traded Monday hit 26,477 lots, from the prior tally of 33,645 lots, ICE Futures US said. Open interest in cotton stood at 190,200 lots as of November 9, from the prior count of 190,171 lots, the exchange said.