US cotton futures settled mixed on Tuesday as players sought to unwind positions in the spot contract before it goes into the delivery period at the end of the week, analysts said. The spot July contract climbed on buying by players who needed to cover short positions given the thin supply of deliverable cotton available.
They then turned around and sold the new-crop December contract. The key December cotton contract on ICE Futures US slipped 0.07 cent to end at $1.24 per lb, ranging from $1.2324 to $1.2772. Spot July increased the 6.00 cent daily limit to finish at $1.5473. Total volume traded reached nearly 14,700 lots at 2:50 pm EDT (1850 GMT), a quarter below the 30-day norm, Thomson Reuters preliminary data showed.
Many of those covering positions in cotton are likely mills who "waited until the last minute" to iron out their shorts, said Sharon Johnson, senior cotton analyst with commodities brokerage Penson Futures. Traders said the sharp gyrations in the spot contract will be the main feature of trading until the end of the week. Beyond that, the market will likely turn its focus back to the damage done by one of the worst droughts ever to strike Texas, the biggest cotton producer in the United States.
Forecaster Telvent DTN forecast dry conditions in Texas through Saturday with the chance of a few showers on Wednesday and Thursday. Open interest in the cotton market, an indication of investor exposure in fibre contracts, was at 149,846 lots as of June 20, the lowest level since May 16, ICE Futures US data showed. Next week, the market will turn its attention to the annual planted acreage report by the US Agriculture Department showing how much was planted to major row crops in the United States.