Cotton futures finished higher on Tuesday on investor short-covering fuelled by a surge in the grains complex, strong financial markets and a weaker dollar, analysts said. Benchmark May cotton on ICE Futures US went up 1.57 cents to finish at 92.24 cents per lb, trading from 90.75 to 92.74 cents. The market was well supported above last week's low near 89 cents.
Volume traded Tuesday was around 12,400 lots, preliminary Thomson Reuters data showed. "I think its short-covering at the end of the month," said Keith Brown, president of commodity firm Keith Brown and Co in Moutlrie, Georgia. The softer dollar, the "positive grains markets," and oversold fiber contracts likely inspired players to buy cotton, he added.
But Brown cautioned that cotton is facing a situation where production in the upcoming 2012/13 season could run ahead of demand. "Cotton has a lot of demons, fundamentally and technically," he said. The market will be looking toward the release on Thursday of the weekly export sales report to gauge if fibre demand will remain robust.
Last week, the US Agriculture Department showed weekly cotton export sales of 185,200 running bales (RBs, 500-lbs each). Cotton export shipments were robust at 326,200 RBs, which exceeds the average amount needed to meet USDA's current projections for the 2011/12 crop year. Open interest in cotton, an indicator of investor exposure, rose slightly to 171,132 lots as of February 27 from the previous session's 171,093 lots, ICE Futures US data showed.