US cotton futures finished at a month high Thursday on investor buying sparked by the worst drought in a century in the key growing state of Texas, analysts said. The National Drought Monitor said in a report that more than half of Texas, the biggest cotton producing state in the US, is experiencing "exceptional" drought. "It's still weather and technicals (rallying cotton)," said Mike Stevens, an independent cotton analyst in Louisiana.
The benchmark December cotton futures on ICE Futures US went up 1.96 cents to finish at $1.3923 per lb, dealing from $1.3381 to $1.395. It was the highest settlement for the third position cotton contract since May 3. Spot July cotton climbed 3.27 cents to conclude at $1.6424 per lb.
Total volume traded Thursday reached over 32,100 lots, almost double the 30-day norm, Thomson Reuters preliminary data showed. Volume traded in the cotton market during Wednesday's rally stood at 28,770 lots, ICE Futures US data showed. Open interest in the cotton market was at 158,298 lots as of June 1, its highest level since April 20, the exchange data showed, and a seeming indication of renewed investor interest in the cotton market.
The December contract has traded over the 200-day moving average at $1.3137 over the last two sessions and is taking aim at the 100-day MA at $1.5206, according to Thomson Reuters data and market dealers. The July contract jumped as well after Allenberg, one of the biggest cotton merchants in the world, decertified 142,686 (480-lb) bales of cotton it took delivery of from the May contract. That left a total of 52,035 bales left in certificated cotton stocks. Traders said that meant deliverable cotton supplies against the spot July contract would be very tight as a result.