US cotton futures finished on Tuesday up the daily limit on light investor buying as the weak dollar and strong grains complex boosted fibre contracts as the market stayed within sight of its record highs, analysts said. The cotton market was shut on Monday to honour US Civil Rights leader Martin Luther King Jr.
The key March cotton contract on ICE Futures US climbed the 4.00 cent limit to settle at $1.4544 per lb, with the session low at $1.4247. Volume traded was around 9,300 lots, about 50 percent below the 30-day norm, Thomson Reuters preliminary data showed.
Mike Stevens, an independent cotton analyst in Mandeville, Louisiana, said pressure in the US dollar index and strength in the grains complex boosted cotton. Higher grains prices would likely entice more US farmers to plant soybeans and corn instead of cotton.
"You can make a case for being a short-term bear, but the long-term fundamentals are still bullish," said Stevens. Cotton is also being propped up by reluctance in India to export more cotton and higher prices in China over the weekend, which triggered renewed buying interest in cotton overnight.
The market also took note of news China has signed deals worth $600 million which included cotton. Demand for cotton in China has also apparently not slowed as imports of the fibre continued to surge in December, a time when the price hit an all-time record of $1.5912 on December 21.
The supply side was further bolstered when influential industry publication Cotlook reduced the cotton crop in the central Asian nation of Uzbekistan to 4.36 million (480-lb) bales from 4.36 million bales. The dollar aside, macroeconomic news was also an inspiration for the cotton market, dealers said. Signs of strong growth in Germany bolstered equity markets to a fresh 28-month high.
In 2-1/2 weeks, the market will be waiting for the closely watched plantings survey by US industry group National Cotton Council. A Reuters survey had pegged US 2011 cotton plantings around 12.4 to 12.5 million acres (5.02-5.06 million hectares), a five-year high and up from last year's sowings of 11.04 million acres.
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