Cotton futures settled higher Friday on investor buying to end a 3-day losing streak as firmer outside markets gave fibre contracts a lift, analysts said. World stocks surged and the dollar fell after Federal Reserve chairman Ben Bernanke left the door open for future US economic stimulus.
The key December cotton contract on ICE Futures US rose 1.33 cents to close at $1.0432 per lb, moving from $1.0215 to $1.0488. It was an inside day since the range was within Thursday's $1.0174 to $1.0639 band. For the week, the market lost 1.79 percent.
Total volume traded hit over 7,700 lots, more than 40 percent below the 30-day norm, Reuters data said. Traders said the December contract seems pinned in a band running from $1 to around $1.0416, the area of support it broke down from this week.
"I think we're still kind of range bound in here," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures in Atlanta, Georgia. She said the trade may wait for next month's monthly supply report from the US Agriculture Department to "get a more accurate read" of world cotton crops and fibre demand.
December has endured a 50 percent retracement from its recent low around 93 cents to its recent peak at $1.09. A fall below $1 would open the door for another probe of lows hit around 93 and then December could go to 90 cents, dealers said.
The market is still keeping tabs on the threat posed by Hurricane Irene to cotton crops in Virginia, South Carolina and North Carolina although it does not appear to be severe and has not been a prime mover of the cotton market. The US Agriculture Department's weekly crop progress report on Monday showed 22 percent of North Carolina's cotton bolls are open for the week ending August 21, and the figure for South Carolina is only 7 percent and 4 percent for Virginia. Heavy rains falling on open cotton bolls would damage cotton quality, rendering the fibre almost unusable for mills.
Since most of the cotton plants are still filling out and are not yet open, the rains may even help the crop develop in those states. A state like Georgia, the second biggest cotton grower in the country, could use the rains because it has been hounded by a severe dry spell.
The level of investor interest in the cotton market improved slightly to hit 147,441 lots as of August 25, against the 140,442 lots on August 11 which was then the lowest level in over two weeks, ICE Futures US data showed. Total volume traded Thursday hit 16,655 lots, nearly triple the Tuesday level of 6,410 lots, which is the lowest level since June 25, 2010, ICE Futures US data showed.