Cotton futures rose for a fourth straight session on Tuesday, in its longest string of daily gains since mid-March as concerns over planting delays and a weaker US dollar and strong financial markets supported fibre prices, dealers said. The most-active July cotton contract on ICE Futures US gained 1.73 cents, or 2 percent, to settle at 87.47 cents per pound. It was the contract's largest daily gain since mid-March.
Even with the recent string of gains, spot cotton prices finished the month down about 4 percent, as the momentum of a speculator-driven rally cooled and prices fell from a 1-year high of nearly 94 cents touched on March 15. The US dollar index was down against a basket of currencies on Tuesday, lending support to fibre as the weaker currency makes dollar-traded commodities less expensive on a relative basis.
Cotton also felt support from strong financial markets, dealers said. The concerns over planting delays that supported corn prices during the previous session and caused wheat prices to surge on Tuesday continued to push fibre prices higher. "The plantings are going very slowly. It's going to be a late crop. And cool weather won't necessarily kill it, but we could be facing a little more weather risk," said Chris Kramedjian, a risk management consultant for INTL FCStone.
Price dips to around 83 cents last Wednesday prompted mill buying, dealers said. Commodities were broadly down during the month of April as investors took risk off the table on worries over the health of the global economy. Open interest totalled 162,749 contracts on Monday, 459 lots higher than the previous session and the first time open interest had not declined in 12 sessions.
Traders said they expected to see strong weekly US government export data on Thursday. The steady pace of sales and shipments underpinned cotton's first-quarter rally of 18 percent, though the main driver of the gains were speculators, who boosted their bullish bets in cotton futures and options to a five-year high in March. Cotton's first-quarter rally came on the heels of two years of losses, as lower-priced, synthetic alternatives eroded demand for the natural fibre and global inventories grew.
The world is forecast to see record global inventories by the end of the crop year through July, though most of those are expected to become part of China's stocks and are considered unavailable to the global marketplace. Beijing began building its reserves in 2011, paying above global prices to support farmers. The world's largest textile market is expected to continue its stockpiling program this year.