US cotton prices rallied on Friday, reversing heavy losses in the previous two sessions, as mills and some foreign buyers found price levels attractive for purchases. Some analysts have said US mills are running with low inventory levels, and when prices fall sharply they need to rush into the market to replenish their stocks to fill orders.
During the steep declines on Wednesday and Thursday, brokers said the mills were buying, but they were letting the prices come to them in a scale down process. "It's been feast or famine. And it seems like this week both the bears and the bulls got fed," said Sharon Johnson, senior cotton analyst at Penson Futures in Atlanta. Benchmark May futures on ICE Futures US closed at 90.15 cents per lb, rising 0.92 cents, or 1.03 percent.
The range spanned 89.02 to 90.72, after dropping on Thursday to its lowest level since December 28 at 89.01 cents. May volume came to a light 7,863 lots in late trade. March cotton surged to finish at 89.85 cents, a 2.37 cent, or 2.71 percent, gain. It rallied to a high at 90.11, a day after falling to its lowest level since December 27 at 87.46. Friday's low was 88.22 per lb.Volume was exceptionally light at 146 lots, but Thursday was the contract's first day of deliveries. Along with US mills, foreign buyers have been in the US market on every decline, brokers said.
The US Department of Agriculture reported healthy weekly cotton export sales of 185,200 running bales. It also reported 22,000 bales of optional origin sales to China. Shipments were strong at 326,200 bales, which exceed the average amount needed to meet USDA's current projections for the 2011/12 crop year.
With questions about global demand for cotton raised after the USDA's last monthly estimates came out on February 9, the strong sales and shipment helped soothe the market's fears. Open interest in cotton, an indicator of investor exposure, Edged down by 365 lots to 170,057 lots as of February 23, ICE Futures US data showed. On Thursday, volume slid by 6,845 lots to 20,922 lots from Wednesday's count.