Cotton futures closed mixed Wednesday as trade and suspected consumer buying wiped out most of the early losses from investor sales, with brokers saying the market may see some consolidation in the days ahead.
The benchmark July cotton contract rose 0.24 cent to end at 66.49 cents per lb, trading from 65.11 to 67.20 cents. New-crop December shed 0.07 cent to finish at 74.94 cents, ranging from 73.79 to 75.50 cents.
Volume in the July contract stood at 13,731 lots at 3:03 p.m. EDT (1903 GMT), while December volume was 8,790 lots. "There is a very good chance that cotton prices have now reached a near-term bottom, supported by demand, and will begin a consolidation phase," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
He added that "fresh demand along with fixations began to pick up yesterday. (They) were evident again overnight as well as on the break this morning." On a fundamental level, the market is monitoring development of the cotton crop for the 2008/09 marketing year (August/July).
Forecaster DTN Meteorlogix said the key growing area of Texas should get light showers through Sunday. Market sources said there were numerous reports of hail in Texas, which will likely produce about half of all US cotton, along with beneficial rains soaking the ground near the end of the spring planting season.
In other news, China said it will reduce tariffs on cotton imported in excess of annual quotas to ease prices for the domestic and clothing industry. Dealers said the move may help spur some buying by China, the world's top consumer of cotton and a major importer of fiber from the United States. Brokers Flanagan Trading Corp sees support in the July cotton contract at 66.40 and 65.75 cents, with resistance at 67.50 and 68.30 cents.
Volume traded Tuesday in the cotton market hit 33,593 lots, exchange data showed. Open interest in the cotton market rose 1,519 lots to 268,743 lots as of May 27, it said.