ICE cotton futures eked out small gains on Wednesday on a flurry of short covering and recovering off near-week lows hit a day earlier after a surprisingly bearish US government crop report raised concerns about demand and higher supplies. A heavy sell-off after the report sent prices to close to one-week lows on Tuesday, triggering short covering late in the session that continued into Wednesday. A weaker dollar also helped buoy prices.
Market participants were watching for signs that a big speculative long position in July may be preparing to sell. "It is hard to (be) overly friendly to prices given how long funds are in the July contract," said Sharon Johnson, introducing broker with Wedbush Securities in Atlanta. "There is limited selling which has made it easier for them to stay long, but I am surprised the front month has not fallen more as there is little buying below the market by way of mills pricing."
On Tuesday, the US Department of Agriculture (USDA) said in its monthly supply and demand report that US exports and ending inventories would be 10.7 million 480-lb bales and 4.4 million bales, respectively, unchanged from the previous month. It also forecast that world inventories for 2015/16 would be 106.29 million bales, down from the prior year's record high but above average market expectations for 105.75 million bales, according to a Reuters poll.
Cotton contracts for July rose by 0.75 cent on Wednesday, a 1.2 percent gain, to settle at 65.77 cents per pound. It traded within a range of 64.85 and 65.80 cents a pound. Certificated cotton stocks deliverable as of May 12 totalled 108,517 480-lb bales, up from 104,553 in the previous session. The dollar index was down 1.00 percent. The Thomson Reuters CoreCommodity CRB Index, which tracks 19 commodities, was up 0.02 percent. The New York average basis price for cotton for July fell by 0.34 cent to 62.87 cents a pound on Wednesday, a 0.54-percent change.