New York cotton sets contract high

Cotton futures ended strong on Friday, posting a new contract peak and roaring to 3-1/4 year highs, and while traders said the tops were in overnight, the weekly US exports report sustained the support.
"Cotton has recorded new contract highs on each of the last two Fridays. Prices shot up on the opening, lead by electronic trading, and inspired by a sharp overnight rally in the Chinese markets and worries about health of the Pakistani crop," said Mike Stevens of Swiss Financial Services in Louisiana.
The New York Board of Trade's key December cotton contract settled with 0.74 cent gains at 64.63 cents a lb. In early business, it raced up to a contract top at 64.90 cents, last seen on April 2004 on a continuation chart basis. Most of the rest also set new life-of-contract highs, ending from 0.10 to 0.87 cent higher.
On IntercontinentalExchange's NYBOT electronic cotton market, December cotton also set a new contract high at 64.90 cents a lb. By 5:23 pm EDT (2123 GMT), the contact remained 0.70 cent firmer at 64.59 cents a lb.
The US Department of Agriculture's weekly cotton export sales data, delayed by the US holiday on Wednesday, were released Friday before the open, adding an early price lift. The report showed upland and pima shipments totalled 481,400 running bales in the week.
The latest weekly USDA also put net upland cotton sales at 206,400 running bales, 3 percent above the previous week, but 3 percent below the prior four-week average. Net sales of 37,600 RB for 2007/08 delivery were primarily to China with 35,000 RB.
Net American Pima sales of 4,000 RB were mostly bound for Japan at 1,700 running bales, then India and Pakistan. Some analysts cast doubt on cotton's ability to maintain their current lofty prices, saying they are substantially overbought. But other said prices may not need to correct much as players compare their value relative to other crops competing for cotton acreage.
"Cotton prices, relative to wheat and soybeans, are cheap and will need to gain substantially in order to prevent greater losses of cotton acres to wheat/soybeans," said John Flanagan at Flanagan Trading Corp in his daily report. Looking ahead, market participants will focus on the monthly USDA cotton supply/demand report for July to try to gauge the impact of last week's plantings data on US cotton output for 2007/08. Analysts said the July figures will be monitored as a rough reference, but are based purely on estimates. Not until August will the USDA include an actual survey in its monthly outlook.
Flanagan Trading Corp's report showed resistance in the December contract at 65.18 cents, then 65.90 cents, with support moving up to 64.10, then 63.50 cents. Open interest in the cotton market rose by 1,276 lots to 209,903 lots as of July 5, NYBOT exchange data showed.