Cotton futures surged over 3 percent on Tuesday, buoyed by technical buying as the market broke through the 70-cent level for the first time in over a month amid concerns that rain may delay crop harvest in top producer China. "Cotton has had a hard time breaking through 70 cents per pound level but once it did, I think it attracted new buying," said Jordan Lea, chairman and co-owner of Eastern Trading in Greenville, South Carolina.
Talks of a delay in crop harvest in China and the completion of ongoing stock auctions in the country by month end were seen supportive of prices, said Michael McDougall, director of commodities for Societe Generale in New York. Forecasts of rains that could hurt crops in certain cotton producing belts across the globe also fuelled speculative buying, traders noted.
However, the current rally is likely to be capped around the 73 cent level as it is not supported by fundamentals, according to Jim Lambert, director of sales at FCStone Merchant Services. The second-month December cotton contract on ICE Futures settled up 2.3 cent, or 3.36 percent, at 70.8 cents per lb. It traded within a range of 67.83 and 70.9 cents a lb, the highest since Aug. 15.
China, the world's top textile market, will grow more cotton than originally expected after favourable weather over the summer, according to an industry survey carried out as farmers prepare to harvest the 2016/17 crop. China cotton futures on the Zhengzhou Commodity Exchange were up 1.10 percent to 14,685 yuan per tonne. Total futures market volume rose by 13,855 to 32,268 lots. Data showed total open interest gained 786 to 232,379 contracts in the previous session. The US Department of Agriculture's weekly crop progress report released on Monday after market close showed that 48 percent of cotton crops in the United States were in good-to-excellent condition, up from 47 percent a week ago.