New York cotton ends at three-week peak

Cotton futures finished up and at a three-week peak Thursday on investor short-covering although the market is on track to be the biggest loser in the commodity sector in 2011, analysts said. The key March cotton futures went up 0.95 cent to finish at 91.63 cents a lb, dealing from 89.53 to 92.09 cents. It was the highest settlement for cotton's spot contract since Dec. 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. Cotton 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 Thursday was nearly 9,300 lots, over one-third under the 30-day norm, Thomson Reuters preliminary data showed. Sharon Johnson, senior cotton analyst at commodity brokerage Penson Futures in Atlanta, Georgia, said demand will be one of the key factors to determine if cotton's advance can be sustained into 2012.
"We'll see if this is a flash-in-the-pan," she said of the sustainability of the advance into 2012. "We definitely got some follow-through buying." Cotton fell early on modest profit-taking but quickly ran into support at the day's low and sparked short-covering on the way back, dealers said.
There were also some investors buying cotton in anticipation that investment funds would increase the share of cotton in their portfolios when reweighting of assets getting the most funds gets underway next month, analysts said. The trade is also wondering if lingering fears the global economic recovery would stall and adversely impact fibre demand may undermine prices in 2012, they said. Total volume traded Wednesday reached 26,141 lots, up sharply from the prior tally of 3,367 lots, ICE Futures US data showed. Open interest, an indicator of investor exposure, was at 151,818 lots as of Tuesday, against the Tuesday level of 151,308 lots, exchange data showed.