Cotton Futures Rally To Near Five-Month High On Investor Buying

Nitin Madkaikar, 16-08-2013 13:03 -

ICE cotton gained on Tuesday in heavy trading as a speculator-driven rally and worry over tight supplies in the United States, the world's top exporter, lifted fibre to a near five-month high. The most-active December cotton contract on ICE Futures US closed up 1.64 cent, or 1.8 percent, at 91.72 cents per lb after rallying to 92.54 cents. That was the highest price for the second month since mid-March when fibre prices clambered to one-year highs. Prices have rallied 7 percent in the last week as a technical "break out" turned cotton's chart pattern bullish and as a monthly US government report on Monday stoked fears over tight US supplies. Open interest climbed to 198,452 lots on Monday, up by 23,731 lots during that time, the most recent ICE data showed. "There's a lot of speculator buying against very light trade selling," said a US trader. Worries that rains will continue to affect crops in the United States drove buying as "threatening weather" moved toward key growing areas, said Sterling Smith, a futures specialist with Citigroup in Chicago. On Monday, the US Department of Agriculture cut its outlook for the smallest US crop in four years, citing reduced yields in the Southeast. The region has seen u

nusually wet weather this planting and growing season, adding to a weather risk premium already building in the market on dry conditions in Texas, the top producing state. Monday's USDA forecast also showed that US stocks in warehouses were lower than anticipated and tha

t the projected US carryover at the end of July 2014 will be the smallest in three years. Further, the crop is expected to be late after plantings delays and exchange stocks have fallen steeply to about 51,000 bales, down from more than 600,000 at the start of July. Concern over tight nearby US supplies has lifted the December contract to a premium over the March 2014 contract, with the backwardation seen as unusual for a market in surplus. Even with concerns over reduced output, global production is still expected to outstrip demand in the 2013/14 crop year that began on August 1.

Global inventories are expected to climb to a record 93.77 million 480-lb bales by the year, as China continues building its reserves and its stocks are forecast to reach 58.26 million bales. Beijing began a stockpiling program in 2011, paying above global prices to support farmers. The policy has led to voracious demand for lower-priced foreign cotton in China, the world's top textile market, and underpinned futures prices, dealers have said. Dealers said they worried that high prices will curtail demand. Historically high prices in 2011 drove demand toward lower-priced synthetic alternatives. Source: Reuters .

ICE cotton gained on Tuesday in heavy trading as a speculator-driven rally and worry over tight supplies in the United States, the world's top exporter, lifted fibre to a near five-month high. The most-active December cotton contract on ICE Futures US closed up 1.64 cent, or 1.8 percent, at 91.72 cents per lb after rallying to 92.54 cents. That was the highest price for the second month since mid-March when fibre prices clambered to one-year highs. Prices have rallied 7 percent in the last week as a technical "break out" turned cotton's chart pattern bullish and as a monthly US government report on Monday stoked fears over tight US supplies. Open interest climbed to 198,452 lots on Monday, up by 23,731 lots during that time, the most recent ICE data showed. "There's a lot of speculator buying against very light trade selling," said a US trader. Worries that rains will continue to affect crops in the United States drove buying as "threatening weather" moved toward key growing areas, said Sterling Smith, a futures specialist with Citigroup in Chicago. On Monday, the US Department of Agriculture cut its outlook for the smallest US crop in four years, citing reduced yields in the Southeast. The region has seen u

nusually wet weather this planting and growing season, adding to a weather risk premium already building in the market on dry conditions in Texas, the top producing state. Monday's USDA forecast also showed that US stocks in warehouses were lower than anticipated and tha

t the projected US carryover at the end of July 2014 will be the smallest in three years. Further, the crop is expected to be late after plantings delays and exchange stocks have fallen steeply to about 51,000 bales, down from more than 600,000 at the start of July. Concern over tight nearby US supplies has lifted the December contract to a premium over the March 2014 contract, with the backwardation seen as unusual for a market in surplus. Even with concerns over reduced output, global production is still expected to outstrip demand in the 2013/14 crop year that began on August 1.

Global inventories are expected to climb to a record 93.77 million 480-lb bales by the year, as China continues building its reserves and its stocks are forecast to reach 58.26 million bales. Beijing began a stockpiling program in 2011, paying above global prices to support farmers. The policy has led to voracious demand for lower-priced foreign cotton in China, the world's top textile market, and underpinned futures prices, dealers have said. Dealers said they worried that high prices will curtail demand. Historically high prices in 2011 drove demand toward lower-priced synthetic alternatives. Source: Reuters .

 
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