US cotton futures finished higher on Tuesday on investor buying inspired in part by floods in parts of the US Delta, and drought in Texas provided support for fibre contracts, analysts said. The key July cotton contract on ICE Futures US rose 3.06 cents to close at $1.5751 per lb, trading from $1.5356 to $1.4887 cents.
-- Cotton open interest drops to 20-month low
-- Weather problems plague US cotton crop
The new-crop December cotton futures added 1.31 cents to close at $1.2837 cents per lb. Volume traded stood at almost 11,500 lots, over 50 percent below the 30-day norm, Thomson Reuters preliminary data showed. Despite Tuesday's surge in values, open interest in the cotton market dropped to 151,977 lots as of Monday, May 2, its lowest level since October 12, 2009, data from ICE Futures US showed.
Open interest is normally seen as an indicator of investor interest in the market and analysts feel the falling level of such interest in cotton futures indicates that investors' appetite for cotton is flagging. "Cotton is looking at floods in Missouri," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, when asked about the steadiness of fibre contracts.
Brown said the floods were caused by the decision of the US Army Corps of Engineers had blown up a levee which flooded 130,000 acres of farmland in some southern US states. He added that a drought in Texas, the top cotton growing state in the country, has also buoyed the market. The market took note of a government report that showed US cotton plantings in 2011 continued to lag the norm.
The US Agriculture Department's weekly crop progress data showed that US cotton 2011 plantings stood at 18 percent planted as of May 1, behind the 24 percent at the same time in 2010 and the 5-year average of 24 percent. Cotton plantings in Texas were at 16 percent, against last year's 24 percent and the 5-year average of 23 percent. Volume traded in the cotton market was at 12,623 lots as of May 2, versus the previous tally of 13,852 lots, ICE Futures US data showed.