New York cotton futures settle higher

US cotton futures closed higher Tuesday on speculative buying but profit-taking knocked the market back after it rose the daily limit, analysts said. Open interest in cotton futures fell to its lowest level in 7 months as investors rotated out of cotton although market fundamentals still were seen as bullish given tight supplies and steady demand going forward.
-- Cotton open interest at lowest level since July 2010 The key May cotton contract on ICE Futures US rose 2.37 cents to finish at $1.936 per lb, trading from $1.9157 to the 7-cent limit up at $1.9823. Last week, the contract hit a record top at $2.1176 per lb.
Open interest in the market hit a 7-month low at 174,074 lots as of Feb. 28, data from ICE Futures US showed. Volume traded Tuesday though stood about 32,300 lots, some 3 percent over the 30-day norm, Thomson Reuters preliminary data showed. Mike Stevens, a long-time independent cotton analyst in Mandeville, Louisiana, said "the vast majority" of the move down from the intra-day highs in cotton futures came from profit-taking.
He said cotton was ripe for a session where investors took cash off the table because of limit-up moves in the market over the past few sessions. Stevens and other analysts said the bullish fundamentals, which have inspired cotton to reach record highs are still present in the market so any setback may well be brief.
The traders point to orders whose prices have not been fixed and a shortage of cotton which can be delivered against the old-crop May and July cotton contracts. High cotton prices are seen enabling cotton to compete against higher-priced grains although the weather will be even more of a wild cat as the spring planting season gets underway in 2011. Analysts said the market will be turning its attention to the US Agriculture Department's weekly export sales data on Thursday to gauge fibre demand. Next week, the focus will be on the USDA's monthly supply demand report and then its potential plantings data at the end of the month.