Cotton futures finished higher Thursday on suspected mill and investor buying, with the focus fixed firmly on the spread trade between the spot July and new-crop December cotton contracts, analysts said. The key July cotton contract increased 0.39 cent to end at 80.76 cents per lb, trading from 80.39 to 81.60 cents. It was an inside day as that range held within Wednesday's 80.29 to 82.49 band.
Volume traded in the July contract stood at 7,777 lots at 2:33 pm EDT (1833 GMT). New-crop December cotton futures rose 0.45 cent to end at 77.74 cents, ranging from 77.07 to 77.94 cents. Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said the unwinding of positions in spot July and into December would be the main feature of action in fibre contracts for several weeks.
The spread business is tied to how the certificated cotton stocks on ICE Futures US would be disposed as the stocks now stand at 1.061 million (480-lb) bales. Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said the direction of the July contract and what happens to the July/December spread "still depends upon disposition of certificated stocks."
Unless the July contract can surmount 82 to 82.50 cents, "the risk is to the downside," said Stevens. Some positive backdrop may have also been generated by the US Agriculture Department's weekly export sales report. USDA said total US cotton sales reached 386,300 running bales (RBs, 500-lbs each), from last week's 285,200 RBs and near the top end of trade estimates of 250,000 to 400,000 RBs.
US cotton export shipments stood at 263,800 RBs, against last week's 226,200 RBs. Brokers Flanagan Trading Corp put support in the July contract at 80.50 and 79.60 cents, with resistance at 81.35 and 82.60 cents. Volume traded Wednesday reached 17,895 lots, up from the previous tally of 16,812 lots, according to ICE Futures. US Open interest rose to 177,974 lots as of May 12 from the prior 177,015 contracts, according to the exchange.