US cotton futures ended Wednesday up the daily limit on suspected speculative buying, but the trading volume was slow to begin and the tone of business lacklustre, analysts said. Open interest in cotton futures stayed near a 7-month low as investors dumped cotton, although market fundamentals are seen by most players as still bullish, given tight supplies.
The key May cotton contract on ICE Futures US rose the 7-cent limit to finish at $2.006 per lb, with the session low at $1.933. Last week, the contract hit a record top at $2.1176 per lb. Open interest in the market stood at 175,406 lots as of March 1, up marginally from the 7-month low at 174,074 lots as of February 28, data from ICE Futures US showed.
Volume traded Wednesday stood at about 18,300 lots, some 40 percent below the 30-day norm, Thomson Reuters preliminary data showed. "It's most likely spec-related (buying)," said Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas. But he took note of the light volume and said moves in cotton are easily exaggerated, given the thin business in the market.
Going forward, traders will be looking toward release of the weekly export sales report from the US Agriculture Department to gauge fibre demand from countries like No 1 consumer China. Brokers believe total US cotton sales will range from 200,000 to 250,000 (500-lb) running bales, against sales in last week's report of 275,100 RBs. Analysts believe the high cotton prices would enable the fibre to compete against higher-priced grains, although the weather will be a major factor as the spring planting season gets underway. The next piece of data will be the USDA's monthly supply/demand report next week and then the critical USDA potential plantings report on March 31, the first government indication of plantings for crops such as cotton this year.
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