US cotton futures settled higher on Thursday on renewed speculative and fund buying boosted in part by a government sales report, but profit-taking knocked the market off its new record highs, analysts said. The cotton market has risen over 22 percent since the middle of January, inspired by strong cotton prices in top consumer China and partly on tight deliverable stocks of cotton on the ICE Futures US exchange.
Cotton's fresh rally made it the early leader of commodities in the Reuters-Jefferies commodity index in 2011, as it rose 17 percent year to date. In 2010, cotton was the best performing commodity as it went up over 90 percent. The key March cotton contract on ICE Futures US rose 2.56 cents to finish at $1.6939 per lb, having traded up the 6-cent limit at a new record top of $1.7283. The session low was at $1.6625.
Total volume stood at over 35,000 lots, almost double the 30-day norm, Thomson Reuters preliminary data showed. "I think we made some kind of meaningful high today, but we won't know until a few days from now," said Sharon Johnson, senior cotton analyst for brokerage Penson Futures in Atlanta, Georgia.
Mike Stevens, an independent cotton analyst in Mandeville, Louisiana, said chart-based market players apparently had a technical objective at $1.70, basis the March cotton contract. Once the market raced past that level early in the session, the rally in cotton seemed to lose steam. "It's spec profit-taking because we reached a technical objective," said Stevens.
The market hit its 6-cent limit up shortly after the US Agriculture Department released its weekly export sales data. USDA said total US cotton sales reached 532,500 running bales (RBs 500-lbs each), above trade expectations it would range from 200,000 to 300,000 RBs and last week's total sales at 457,500 RBs. "We couldn't close limit-up despite bullish information," Johnson said in referring to the USDA data.
The market also got a partial boost from strong Chinese cotton prices. The key September cotton futures on the Zhengzhou Commodity Exchange was last done at 32,635 yuan per tonne, up 1,300 yuan.
Analysts said that Chinese cotton market players are disappearing from cotton trading as they leave for the Lunar New Year holidays early next month. With the USDA sales data done, the market's attention should turn toward a report on potential US 2011 cotton plantings. That forecast will be released on February 4 by industry group the National Cotton Council of America at its annual meeting in San Antonio, Texas.
A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings from 12.48 million to 12.53 million acres, a five-year high and an increase of around 15 percent from last year's cotton sowings of 11.04 million acres.