US cotton futures closed higher on Wednesday on investor buying, boosted by a strong grains complex, a weak dollar and a rally in equities after a strong debt sale by Portugal, analysts said. The key March cotton contract on ICE Futures US rose 0.72 cent to settle at $1.4797 per lb, having briefly hit the 5-cent trading limit at $1.5225. The session low was at $1.477.
Volume traded was around 29,000 lots, more than 60 percent above the 30-day norm, Thomson Reuters preliminary data showed. "Cotton got caught up in the bullish enthusiasm of corn and soybeans, strong stock markets and weakness in the US dollar," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
Global stocks and the euro rallied after healthy demand for Portugal's debt eased concern over eurozone debt. There was little reaction from cotton market players to the US Agriculture Department's monthly supply/demand report. USDA reduced its estimate for 2010/11 world cotton ending stocks to 42.84 million (480-lb) bales, from 43.39 million in last month's report.
Stevens said the data "merely confirmed" cotton's bullish fundamentals. Rebalancing by index funds of their positions in the cotton market depressed values midway through trading, dealers said. The process of realigning positions is expected to run into next week, they said. But the strong outside markets blunted the fall and led cotton futures higher into the close. The market will now be looking toward the USDA's weekly export sales report on Thursday.
Brokers said they expected total US cotton sales to range from 100,000 to 200,000 (500-lb) running bales, compared with 169,100 RBs in the last USDA report. The market is now waiting to see if demand is destroyed by the strong cotton futures price going into the spring.
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