Benchmark US cotton futures ended up 2.8 percent on Tuesday, on position juggling in heavy, indecisive trade before the release of a government crop report at the end of the week, brokers said. Much of the business was in spreads, as players traded the difference between spot May and the new-crop December cotton contracts. They also played the July-December spread.
The key May cotton contract on ICE Futures US increased 5.51 cents to close at $2.0106 per lb, having ranged from down the 7-cent limit down at $1.8885 to up the daily limit at $2,0255. The new-crop December cotton contract gained 1.67 cents to end at $1.3776. Total volume traded in the cotton market was around 41,500 lots, over two-thirds above the 30-day norm, Thomson Reuters preliminary data showed. Reflecting the high level of investor interest, open interest in cotton futures stood at 193,264 lots as of April 4, a 6-1/2 week high, according to ICE Futures US figures.
"The market is gyrating like this before the report," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia. The US Agriculture Department releases its April supply/demand report on Friday. Traders said the focus was on any adjustments in consumption and stock levels.
The first estimates for the 2011/12 cotton season will be released by the USDA in its May production report. The market has already digested the USDA's estimate of US cotton sowings and players are especially worried about the dry spell in the top growing area of Texas, which is expected to plant about half of the US cotton crop.
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