US cotton futures finished Friday with moderate gains as investors covered short positions heading into the weekend amid ideas Greece will reach a deal on its debt crisis and MF Global customer accounts will be transferred to add liquidity to cotton trades, brokers said.
"All week cotton ended lower, but today it finished stronger, because some guys wanted to take their profits going into the weekend," said Ron Lawson, managing director of logicadvisors.com. The key December cotton contract on ICE Futures US rose 0.62 cent to end at 98.54 cents per lb, after trading between 99.82 and 98.05 cents.
Total estimated volume on Friday was 20,721 lots, one-third higher than the 30-day norm, preliminary Thomson Reuters data and ICE Futures US data showed. Last Friday, the December contract ended at $1.0437, the highest since September 21. Investors were wary of taking sizeable cotton positions or leaving short positions open going into a weekend, with survival of Greece's government in doubt ahead of a confidence vote and uncertainty regarding Europe's debt bailout package.
Also this weekend, transfer of cotton positions amid MF Global's bankruptcy filing should get sorted out, which could help cotton prices on Monday, brokers said. Realistically, Lawson added, "If we get a peaceful outcome for the Greek debt crisis, we should have a better platform for commodities on Monday, along with what could be some resolution to the MF Global thing. So why not take some profits?"
Meanwhile, he said, the MF Global mess, "is absolutely having an effect on day-to-day trading in the cotton market. There are some players with money that is frozen, their positions are literally frozen and they cannot operate." Commodity brokers rushed on Friday to finish transferring thousands of customers from bankrupt rival MF Global, shifting their attention to the delicate task of ensuring new clients' margins are topped up by next week.
In the background, Chinese cotton buyers continue to keep a floor under prices. As they replenish their state reserves with Chinese cotton, they have been buying US cotton imports to replace those reserves. US cotton prices, "can't break down, because the Chinese are there to buy whatever you bring. They're not a bullish factor, but they are one hell of a supportive feature," said Lawson.
Technically, dealers said the December contract could break out to the upside of its recent sideways band. The first target would be $1.0290 per lb, then to a recent high near $1.05. The downside target is about 97.30, Thursday's low and the contract's lowest price since October 24.
Open interest in cotton, usually taken as an indicator of investor exposure in cotton, stood at 165,057 lots as of November 3, its highest level since April, and up from 164,944 lots on Wednesday, exchange data showed. Total cotton volume traded Thursday came to 20,721 lots, up from Wednesday's tally of 20,070 lots, ICE futures US data reported.
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