US cotton futures settled on Tuesday at a fresh three-week high on chart-based speculative buying and worries brisk US cotton sales could lead to a tighter supply situation in the weeks ahead, analysts said. The benchmark May contract on ICE Futures US rose 1.68 cents, or almost 2 percent, to end at 92.59 cents per lb, dealing from 90.41 to 93.18 cents. It was the loftiest close on the spot cotton contract since early March.
Volume traded amounted to nearly 33,200 lots, about a third over the 30-day norm, Thomson Reuters data showed. "It's a little bit of short-covering anxiety," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia.
He said the buying may have been sparked in part by talk the government may have to raise its estimate of US cotton exports and this could lead to a further drawdown in a tightly supplied market. In its March supply report, the US Agriculture Department forecast US 2011/12 cotton exports at 11 million (480-lb) bales. Traders said this may have to be raised by a 100,000 to 300,000 bales.
Technically, the market traded over the 100-day moving average around 92.59 cents, sparking more fund buying in fibre contracts. Brown said there was also talk of dry conditions in China, the world's top producer and consumer of cotton. Analysts said many market players will likely begin evening up their positions the next few sessions ahead of the release of the USDA's annual potential plantings report for crops such as cotton, corn, soybeans and wheat on Friday.
In early February, the industry group National Cotton Council had pegged US 2012 cotton sowings at 13.63 million acres (5.5 million hectares), down 7.4 percent from 2011 cotton plantings of 14.72 million acres. Another dealer said cotton futures have found strong support at 87 cents, basis May, because it is an area where mill and trade buying has shown up and propelled fibre contracts up.
Open interest, an indicator of investor exposure, fell for the first time after it had risen 12th straight session. It stood at 190,776 lots as of March 26. On Friday, the open interest in the cotton market was at 190,909 lots, the highest since February 9, ICE Futures US data showed.