New York cotton scores moderate gains

US cotton futures finished on Wednesday with moderate gains, driven up as export buyers continued to show interest after a recent steep price decline and mills rushed to fix prices ahead of next week's deliveries. Since large speculative cotton players finished rolling out of their March positions on Monday, the nearby contract was able to rally on export and mill buying, which tightened their spreads to later-dated issues.
The narrowing spreads drew other buyers into the market on technical buying, helping to drive the price up to its highest level since last Thursday's slide to lows last seen in late December. "You had good technical action, plus a pick up in export interest at the lower levels that supported the market, and mill fixations," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
Benchmark March cotton on ICE Futures US ended at 92.50 cents per lb, a 0.25 cent increase, after a session that earlier lead prices up about 3.25 percent to their highest level in a week. The range spanned 92.15 to 94.37 a lb. The March tally rose to 11,698 lots shortly after exchange trading finished.
Small speculators continued to roll long March positions into May or July contracts ahead of the February 23 delivery date. May futures, which now hold the largest open interest of any cotton contract on the board at nearly twice March, finished at 93.48 per lb, up 0.64 cents May volume stood at 14,023 in late business. When prices slid last week, brokers said a slew of export buyers were waiting to grab cotton at the lower levels.
"It goes back to last Thursday when we went back under 92 cents, there was a lot of export demand and buying that was sitting down there," said Stevens, echoing other analysts. Similarly, he said, "You had a rush, beginning Tuesday afternoon, of mill fixation buying that came into the March (futures) because they have to get everything done before first notice day."
Finally, in late Tuesday trade, forward spreads started to narrow dramatically, continuing to pull in when March futures rallied on Wednesday. The December/March spread had traded as wide as 150 points last week. But independent buyers of March futures drove prices to within 8 or 10 points of May prices on Wednesday morning, which attracted more buyers. The spread to May widened back out to 92 points as March came off its high. The December-March spread finished at 1.17 points.
Open interest in cotton, an indicator of investor exposure in the market, increased by 943 lots to 189,670 lots as of February 14 ICE Futures US data showed. On Tuesday, trading volume declined to 26,048 lots from 26,766 lots traded on Monday, exchange data showed.