New York cotton settles at two-month high

Cotton futures ended Thursday at a fresh two-month high on follow-through investor buying although profit-taking pruned the market's gains, analysts said. The key December cotton contract on ICE Futures US rose 3.29 cents, or almost 3 percent, to end at $1.1363 per lb, trading from $1.1117 to $1.1547. It was the loftiest close for cotton since July 8.
Volume on Thursday was almost 26,500 lots, the highest amount traded since July 15, ICE Futures US data showed. The total traded would be more than double the 30-day norm, preliminary Thomson Reuters data showed. "We had some follow-through (buying)," said Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures in Atlanta, Georgia.
She said news of floods in major cotton producer Pakistan and the announcement by top consumer China it would start stockpiling cotton was apparently taking hold in the cotton market. Technically, dealers said the close over $1.13 meant cotton may now have the momentum to grind towards areas near $1.20 and then $1.24, basis December.
Cotton industry players said lower supplies out of China, the world's biggest producer and consumer of cotton, Pakistan and the US, the world's top cotton exporter could again stoke a rally in fibre contracts. Last year, floods in Pakistan and poor yields in China in 2010 provided the spark for cotton futures to kick off its historic rally to record levels above first $1 and then $2 a lb, levels not seen in over 150 years.
The market will now be looking toward the release of the US Agriculture Department's monthly supply/demand report on September 12, especially since most of the trade discounted the figure for US 2011/12 cotton production in the August data as being too high. The level of investor interest in the cotton market hit 151,107 lots as of September 7, the highest level since June 14, exchange data showed. Traders said this meant investors are apparently trying to build long positions in cotton because they believe it is headed higher.