Cotton futures finished near a 4-week high Tuesday on all-around buying sparked by a bullish government supply/demand report, and some follow-through interest should lift prices this week, brokers said. The key March cotton contract rose the 3.00-cent limit to end at 72.16 cents per lb, with the session low at 69 cents.
It was the highest finish for cotton on the spot daily charts since the middle of January, when it traded near 73 cents. Volume in the March contract hit 21,875 lots at 2:54 pm EST (1954 GMT). The USDA cut its estimate of US 2009/10 cotton ending stocks to a measly 3.3 million (480-lb) bales, down 1.0 million bales from last month's estimate and from the 6.34 million bales in beginning stocks for this season.
"This is a lot of ... panic short covering," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia. She added though that most of the covering was in the spot contract, where a lot of investors had bailed out during the recent fall of fibre contracts to a 12-week low.
"Normally, the February USDA supply/demand report provides no surprises. Not so this month. Not only was there a surprise, there was a shocking wakeup call to the mills who have been buying their cotton on-call, hoping for lower prices," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
Analysts said the market would turn its focus by next month to prospects for new-crop cotton, especially with the release on March 31 of the USDA's annual potential plantings report. Brokers Flanagan Trading Corp sees resistance in the March contract at 72.20 cents, with support at 71.25 and 70.45 cents. Total volume traded Monday hit 41,591 lots, against the previous 50,279 lots, according to data from ICE Futures US Open interest in the cotton market stood at 162,140 lots as of February 8, down from the prior count of 164,173 lots, the exchange said.