US cotton futures settled higher Monday, extending the market's advance as players fretted over the damage the severe drought will inflict on the top cotton growing area of the United States, analysts said. The spot July contract climbed on short-covering by players who needed to cover short positions given the thin supplies of deliverable cotton in the contract with first notice day for deliveries coming up this week.
The key December cotton contract on ICE Futures US rose 0.30 cent to finish at $1.2407 per lb, ranging from $1.2155 to $1.2666. On Thursday, the contract closed at $1.2018 in the lowest finish for the third position cotton contract in nearly three weeks.
Spot July increased 3.55 cents to end at $1.4873. Total volume traded Monday reached nearly 14,000 lots at 2:49 pm EDT (1849 GMT), nearly a third below the 30-day norm, Thomson Reuters preliminary data showed. "It's still a weather market and that continued to follow through today," said Mike Stevens, an independent cotton analyst in Louisiana.
Forecaster Telvent DTN forecast dry conditions in Texas through the rest of the week with possibly a few showers on Wednesday. The spot July contract was given a strong boost by short-covering from suspected mills who need to cover their positions in the market. Texas aside, the cotton trade will also be monitoring the extent of drought damage in Georgia, the second biggest producing state in the country, and the impact of floods which struck several southern cotton-growing US states along the Mississippi river.
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