Saturday, 16 June 2012 02:33
NEW YORK: Cotton futures finished higher Friday mainly on books quaring by investors who are looking ahead to voting in Greece on Sunday, which could potentially roil financial markets next week if Athens decides to abandon the euro zone.
Like other players across the commodity market spectrum, cotton investors are skittish despite assurances by G20 officials that they stand ready to stabilize markets if they are threatened by upheaval due to the Greek vote.
The key December cotton contract on the ICE Futures US exchange rose 0.42 cent to finish at 71.02 cents per lb, dealing from 70.37 to 71.59 cents. It was an inside day since the range is within Thursday's 70.01 to 73.08 cents band.
For the week, the contract is up 1.63 percent.
"Who knows what happens Sunday night," said independent cotton analyst Mike Stevens in alluding to general market nervousness over the impact of the Greece vote and the protracted euro zone debt crisis.
With macro factors already hanging over the cotton market, Stevens said fiber contracts are also struggling with bearish fundamentals such as "excess supply and slack demand."
The spot July cotton futures climbed 1.89 cents to close at 79.98 cents per lb.
The spread between July and December is at its widest since early June 2011, according to Thomson Reuters data.
Options expiration in July is forcing many investors to square their positions.
July has also climbed because investors are paying up to exit their positions because the notice day for the July contract is on June 25 and most investors or speculators would want to avoid delivering cotton against the contracts.
Since the only cotton that can be delivered in the exchange is US fiber, there is a shortage of that cotton because most US supplies have already been harvested and sold.
Open interest in July stands at 41,786 lots as of June 14 and investors would want to unwind those positions before it goes into delivery.
Open interest in the cotton market, an indicator of investor interest, amounted to 199,423 lots as of June 14, ICE Futures US exchange data showed.
Volume traded on Friday stood near 37,500 lots, over 50 percent above the 30-day norm, Thomson Reuters data showed.
Copyright Reuters, 2012