New York cotton settles at three-week high

Cotton futures ended Wednesday at a three-week high on investor buying in a heavily beaten down market and in anticipation lower prices would lead to lower cotton plantings in the US and other countries in 2012, analysts said. The key March cotton futures increased 2.77 cents or by 3.15 percent to lose at 90.68 cents per lb, dealing from 87.75 to 91.91 cents.
It was the highest settlement for cotton's spot contract since December 8, Thomson Reuters data showed. Since scaling a record top over $2.20 a lb in early March, cotton demand has shrunk and prices have more than halved. Still, the market is on track to be the worst performer in the commodity complex in 2011. In contrast, the market was up over 90 percent in 2010 as it was the second best performing commodity that year.
Traded volume on Wednesday was nearly 25,000 lots, almost 60 percent above the 30-day norm, Thomson Reuters preliminary data showed. "Everyone was completely bearish and the market was oversold," said Sharon Johnson, senior cotton analyst at commodity brokerage Penson Futures in Atlanta, Georgia. She added the market may have also been aided by the perception that cotton sowings in the northern hemisphere, including the US and China, would be "smaller" in 2012.
Some investors may also have been buying cotton in anticipation that investment funds would increase their portfolio in cotton when reweighting gets underway next month, dealers said. The overhang for cotton would come from the global economy and worries a downturn could again adversely impact cotton demand, analysts said. Total volume traded Tuesday reached 3,367 lots, up slightly from the level last Friday of 2,975 lots, which is the lowest level traded since late in 2008, ICE Futures US data showed. Open interest, an indicator of investor exposure, was at 151,308 lots as of Tuesday, against last Friday's level of 151,176 lots, exchange data showed.