US cotton futures settled higher on Thursday on investor buying and as Texas, the top growing state in the country, suffers a drought said to be its worst in more than 40 years, analysts said. The key May cotton contract on ICE Futures US climbed 6.95 cents to end at $2.0882 per lb, dealing from $1.9687 to the 7-cents limit up at $2.0887.
Volume traded stood at around 25,800 lots, almost 15 percent below the 30-day norm, Thomson Reuters preliminary data showed. Open interest in the market, an indicator of investment exposure in cotton, was at 176,212 lots as of March 23, a level that is close to an 8-month low, data from ICE Futures US showed.
"This is the problem when weather collides with the reality of tight stocks," Keith Brown, president of commodity firm Keith Brown and Co. in Moultrie, Georgia, said.
He was referring to the fact that Texas, the leading producer of cotton in the United States, is experiencing a drought that observers have called its worst in more than 40 years. The National Weather Service said in a statement that the drought in Texas is "expanding" while rainfall deficits grow.
Other traders feel though that cotton futures had been choppy the last few sessions, and profit-taking could hit the market on Friday.
On March 31, the US Agriculture Department will release its annual potential plantings report for crops such as cotton, corn, soybeans and wheat among others. The USDA report is the first government survey of likely plantings for major row crops in 2011. Despite the rally in cotton to record highs, the fibre has to compete for acreage against similarly high-priced grains this year.
Analytical firm Informa Economics projected on Friday US farmers will plant 13.13 million acres to cotton, a level that would be the highest in five years.
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