Cotton futures ended on Thursday up by the daily 4.00 cent limit at a six-week high as the market rose for the fifth straight session, sparked mainly by news European leaders have forged a deal to resolve the debt crisis, analysts said. The market was also inspired by strong US cotton export sales reported by the US Agriculture Department's weekly export sales data and news that Pakistan has cut its cotton output by nearly 1 million bales.
"We've got all the ingredients (for an advance)," said Sharon Johnson, senior cotton analyst at commodity brokerage Penson Futures in Atlanta. The key December cotton contract on ICE Futures US went up the 4.00 cent daily to finish at $1.0432 per lb, with the session low at 99.91 cents. It was the highest settlement for spot cotton in six weeks.
Total volume traded Thursday hit over 23,400 lots, some two-thirds over the 30-day norm, preliminary Thomson Reuters data showed. The market has rebounded strongly since falling last Thursday to end at 96.86 cents in the lowest settlement for the spot contract since September 2010.
The fall triggered buying by No 1 consumer China, which notched total upland cotton sales of 396,700 running bales (RBs, 500-lbs each). Cotton's surge was also stoked by the impact of the EU deal on world stocks, which surged as the euro jumped to a 7-week high. The rally also spilled over into the crude [O/R] and grains markets. Johnson said cotton raced past the 50-day moving average and is now taking aim at 100-day MA at $114.17 as the next target for technical players.
Open interest in cotton, usually taken as an indicator of investor exposure in cotton, stood at 160,306 lots as of October 26, its highest level since June 9, exchange data showed. Total volume traded Thursday in the cotton market reached 13,764 lots, down from the previous tally of 25,631 lots, the heaviest amount traded since September 8, ICE futures US data reported.