Cotton futures finished higher Monday on investment fund buying tied to end of the month short-covering as analysts mulled the next move in fibre contracts this week. The benchmark March cotton contract increased 0.84 cent to finish at 74.68 cents per lb, moving from 73.88 to 74.84 cents.
March contract volume reached 5,794 lots at 2:38 pm EST (1938 GMT). "The primary factor (for cotton's rise) is its light volume and mostly window-dressing as the month comes to an end," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana. He said cotton futures may be vulnerable "to a dip" if Monday's rise turns out to really be largely window-dressing in the market.
Analysts said last week's strong buying by top consumer China seems to have petered out. Chinese mills are still making inquiries for higher grade cotton, but the pace has slowed noticeably, brokers said. The impact of the debt crisis in Dubai has also faded somewhat although some market participants remain wary about any further shocks to the global financial system going forward.
A weekly report by the Nunn Cotton Co in Tennessee said that "if cotton prices (are) to continue higher, the dollar must remain under pressure and there must be continued confidence in world economies." Cotton prices are also starting to look attractive to farmers who would be deciding on row crops to be sown in the first quarter of 2010.
Brokers Flanagan Trading Corp sees resistance for the March cotton contract at 75.50 and 77 cents, with support at 74.05 and 72.85 cents. Total cotton volume Friday hit 13,520 lots, from the prior tally of 12,573 lots, ICE Futures US said. Open interest in cotton stood at 174,959 lots as of November 27, from the prior count of 177,172 lots, the exchange said.