Value investing by mills and investors proliferated US cotton market

The US December cotton which had lost 33 percent over the past two months has started gaining momentum as the efforts of cotton mills and investors have again proliferated the five year low fibre market by value investing and introducing the practice of purchasing securities to cover an open short position.

Investors due to fear of excess supply had derelict futures. Jack Scoville, vice president at Price Futures Group in Chicago said that they were getting to a point where the mills are stepping up to buy fibre here. If you’ve been short for a while, you’re taking some money off the table here.

The most-active December cotton contract on ICE Futures US finished up 0.4 cent at 63.27 cents a lb. The session low was 62.02 cent, the lowest since October 2009 for a benchmark second month contract in US cotton on a continual basis.

The market has slid steadily since the US Department of Agriculture projected last month that US cotton stockpiles will climb to a six-year high of about 5 million bales by the end of the 2014/15 crop year. The USDA has also forecast that global inventories will swell to a record of nearly 106 million 480-lb bales.

Sharon Johnson, a cotton specialist with KCG Futures in Georgia, said that December contract’s drop to 62 cents prompted participants to buy back their bearish bets. Johnson also attributed Friday’s gain to strong export sales data reported in the previous session.
US cotton prospects rose on Friday after three days of declining prices.