US cotton futures finished up the 7-cent daily limit at an all-time high on Friday amid speculative buying, scarce supplies and signs that global economic growth is gathering steam in 2011, analysts said. The key May cotton contract on ICE Futures US finished locked at the high of $2.127 per lb. The session low was $2.064. For the week, the market is up 15.45 percent, the best performance since 19.3 percent the week ending December 5.
However volume was on the light side at near 22,000 lots, about 30 percent below the 30-day norm, Thomson Reuters preliminary data showed. "The demand for cotton is improving and the world's economies are improving," said Ron Lawson, long-time cotton analyst at brokers logicadvisors.com in Sonoma, California.
"We don't have a magic wand to wave this (demand crunch) problem away," he added. Analysts said the market was still trading on Thursday's strong weekly US Agriculture Department export sales report. USDA said US cotton sales last week hit 411,600 running bales (500-lbs each), near double expectations for 200,000 to 250,000 RBs and up from 275,100 RBs the previous week.
Lawson said that given the paucity of supplies to be delivered against the old-crop May and July cotton contracts, a further surge to levels approaching $5/lb cotton is in the realm of possibility. Despite the elevated cotton prices, open interest in cotton stood at 174,962 lots as of March 3, up a few hundred lots when compared to the 7-month low at 174,074 lots as of February 28, data from ICE Futures US showed.
Analysts believe the high prices would enable cotton to compete against higher-priced grains in the battle for acres as American farmers decide what to plant this spring. After next week's USDA monthly supply/demand report, which may contain some revised consumption figures, the focus will turn to the vital March 31 USDA potential plantings report, the first government indication of likely plantings for major row crops like cotton, corn, soybeans and wheat in 2011.