New York cotton posts little gains

Cotton futures ended on Thursday with moderate losses, but held onto the higher levels achieved during the first two sessions of 2012, as investors paused to absorb the recent gains. Benchmark March cotton futures finished with 1.18 cent gains at 94.74 cents a lb. The trading band ran from 94.38 to 95.92 cents, near the top of the range built so far in 2012.
"Since December 14, which is the low, we've rallied 1,200 points and since the start of the year we've rallied 450 points. So, to sit back down 100 points is nothing alarming," said Keith Brown of Keith Brown and Co in Moultrie, Georgia, noting that cotton fell along with other commodities, as participants focused on taking profits and dollar strength.
In mid-December, benchmark cotton prices slid to lows dating back a year and have been climbing ever since. By Wednesday, the contract reached its highest level since November 18, surging nearly 4 cents. Investors were stocking up on many commodities after major commodity indexes rebalanced their 2012 weightings.
Despite cotton's lower close, brokers said prices held up relatively well amid profit-taking by some short-term players. The benchmark contract's volume was a light 9,110 contracts late in the day. Cotton's overall volume came in about 17.5 percent above its 30-day average, but 25 percent below the 250 percent norm. "After an 1,100 point run, the market is certainly due for a rest. The big drop in March open interest indicates somebody else obviously feels the same way," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
Broader fundamental factors argue for higher prices, brokers said, as China continues to buy cotton for its state reserves and as drought conditions in the US cotton belt persist. US government forecasts warned that La Nina, the weather phenomenon widely blamed for drought in the cotton growing regions of the southern United States and South America, may continue for longer than expected.
On Friday, USDA will release weekly export sales figures, which have been tepid though shipments have shown strength. And, with analysts forecasting December payroll gains of 150,000 for Friday's US labour report, some cotton buyers may jump back in the market because of increased potential for clothing purchases.
At the annual Beltwide cotton conference, US farmers said they plan to plant about 10 to nearly 12 percent less cotton in 2012 due to lower prices and stiff competition from rival products like corn and soybeans, a survey by Thomson Reuters showed Thursday. Total volume traded Wednesday came to 20,174 lots, a decline from the 25,174 lots on Tuesday, ICE Futures US data showed. Open interest, an indicator of investor exposure, eased to 147,966 lots on Wednesday from 152,079 lots on Tuesday.