Cotton futures closed higher on Wednesday on investor short-covering as the market recovered from a fall to a nine-month low after US Federal Reserve Chairman Ben Bernanke raised the possibility of more stimulus which alleviated for now worries of a flagging global economy.
Cotton had tracked losses in other commodity markets due to fear the eurozone debt crisis would spread like a disease and damage economic growth, which would then have a knock-on effect in depressing cotton demand, analysts said. Stocks, commodities and the euro rose after Bernanke said the Fed could provide more stimulus if recovery stalls. The key December cotton futures on ICE Futures US rose 4.07 cents or 3.90 percent to finish at $1.0846 per lb, dealing from $1.0444 to $1.0885.
On Tuesday, the contract ended at $1.0439 per lb, the lowest close for the second position cotton contract since early October 2010, Thomson Reuters data showed. Volume traded was almost 15,000 lots at 2:51 pm EDT (1851 GMT), almost a quarter below the 30-day norm, Thomson Reuters preliminary data showed.
"The macro ills are not the primary concern today," said Sharon Johnson, senior cotton analyst at commodity brokerage Penson Futures in Atlanta. She said the market was boosted by "Bernanke making the announcement about the possibility of new stimulus" to prop up an economy still on shaky ground and deflated by the crisis in Europe. Johnson said the next move of the market will be closely watched by mills who will only step in if a bottom is in place in cotton futures.
Traders said the market is still monitoring conditions in Texas and the debate in the trade will now turn to how much of the US cotton crop would be harvested in the fall. Open interest in the ICE futures cotton market stood at 137,983 lots as of July 12, ICE Futures US data showed. Volume traded on Tuesday stood at 23,268 lots, it added.