Cotton jumps over 1 percent on US-China trade deal optimism

Cotton futures rose more than 1% to near one-week high on Monday as renewed hopes that the United States and China will reach a trade deal lifted demand for the natural fiber. Cotton contracts for March settled up 0.95 cent, or 1.46%, at 65.80 cents per lb.

It rose to 65.90 cents earlier in the session, the level last seen on Nov. 19. "The main factor is just that there is some positive news over the weekend out of China regarding their efforts to improve the intellectual property rights and so that's really the main thing that is pushing up all the commodities markets," Bailey Thomen, cotton risk management associate with INTL FCStone.

China and the United States are "moving closer to agreeing" on a "phase one" trade deal, the Global Times, a tabloid run by the ruling Communist Party's official People's Daily, reported on Sunday. That added to optimism from comments over the weekend by a top US official that an agreement was still possible by the end of the year, lessening fears that the negotiations could carry on into 2020.

Optimism around a trade deal lifted the S&P 500 and Nasdaq to new highs. "It's a good sign across all the commodities that China is working to make some changes and that was the major sticking points on the trade situation," Thomen said.

Cotton speculators increased their net short position by 559 contracts to 25,474 in the week ended Nov. 19, according to data from the Commodity Futures Trading Commission released on Friday. Total futures market volume fell by 7,395 to 19,879 lots. Data showed total open interest fell 3,183 to 197,313 contracts in the previous session. Certificated cotton stocks deliverable as of Nov. 25 totaled 75,029 480-lb bales, up from 71,645 in the previous session.