NEW YORK: Cotton futures settled firmer Thursday amid talk China may be buying to rebuild stocks as the market shrugged off a bearish government crop report, weak charts and lower financial markets, analysts said.
The key December cotton contract on ICE Futures US rose 1.05 cents to end at $1.0156 per lb, trading from $1.0011 to $1.0248. The market has ranged from about 98 cents to $1.04 in the last 15 sessions.
Volume on Thursday was in excess of 11,500 lots, more than 10 percent under the 30-day norm, preliminary Thomson Reuters data showed.
Keith Brown, president of commodity firm Keith Brown and Co in Moutrie, Georgia, said cotton put in an "impressive" performance despite a retreat in financial markets caused by a narrowing of China's trade surplus.
"Cotton's holding remarkably well," added independent analyst Mike Stevens in Mandeville, Louisiana.
He said the failure of the December contract to finish over $1.04 the past few sessions would have normally meant a retreat below $1 and a probe of the recent low of 98 cents.
On Wednesday, more pressure came from the US Agriculture Department's monthly supply report which increased world 2011/12 cotton ending stocks to 54.83 million (480-lb) bales from 51.91 million last month. USDA also raised world cotton production to 124.19 million bales from 122.96 million, and reduced world consumption to 114.38 million from 115.22 million bales.
All of that, say Brown and Stevens, should pushed cotton lower. Instead, it went higher.
Analysts said the main suspect is Chinese buying to rebuild the Asian government's cotton stocks, which have been run down to stabilize internal cotton prices after the fiber historic rally last year.
"The main suspect in cotton holding up is China," a dealer said. With China buying, traders said mills from other countries may have jumped in as well and supported the market at the psychological $1 level.
Open interest in cotton, usually taken as an indicator of investor exposure in cotton, stood at 153,707 lots as of Oct 12, from 153,794 lots on Oct 11, the exchange said.
Volume traded on Wednesday in the cotton market reached 18,352 lots, against the prior tally of 12,216 lots, ICE futures US data showed.
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