Cotton futures finished higher Wednesday on follow-through investment fund and speculative buying, with traders saying the momentum from the advance may shove fibre contracts up the rest of the week. The key December cotton futures on ICE Futures US rose 2.85 cents or by nearly 3.0 percent to finish at $1.0361 per lb, on the heels of a 4.1 percent gain on Tuesday.
It traded from 99.85 cents to a high of $1.0444, its highest prices since gapping lower between July 14 and 15. Total market volume hit almost 15,000 lots at 3:16 pm EDT (1816 GMT), around 7 percent below the 30-day norm, Thomson Reuters preliminary data showed. "We're just building on yesterday's gains," said Sharon Johnson, senior cotton analyst for commodities brokerage Penson Futures in Atlanta, Georgia.
Trade buying at the Tuesday low of 93.20 cents and speculative fund buying on the way up was extended into Wednesday's session, dealers said. Independent cotton analyst Mike Stevens said in a report that cotton futures, basis the key December contract, "still needs to close above $1.0446 (per lb) to generate a test of $1.0888" which is the area from which the market had broken down recently.
Traders said they were also carefully monitoring the formation of a storm in the Gulf of Mexico as computer models point to it heading toward southern Texas later in the week. Cotton farms in the southern coastal bend of Texas, the biggest cotton growing area in the country, are about to begin harvesting their crop in August. A storm at this time is particularly unwelcome because cotton bolls are open and quality may take a hit if they get drenched in torrential rain. The crop is the most heavily irrigated in a state reeling from one of the worst droughts in Texas history.
Volume traded Tuesday reached 20,136 lots, the highest since July 18, and against the Monday volume of 8,999 lots, which was the lowest level since July 1, ICE Futures US data showed. Open interest in the cotton market stood at 138,911 lots as of Tuesday, which is also the highest level since July 8, the exchange data added.