ICE cotton futures jumped 25 percent this year, marking its best annual performance since 2010, with prices hovering near a 3-1/2 year high on Friday, on higher demand for the natural fibre. Cotton futures rose nearly 20 percent in the fourth quarter this year, notching their best quarterly gain since 2011, while also registering a 10th straight weekly gain, the longest such streak since at least the end of 2005, according to data on Thomson Reuters Eikon.
Higher demand for US cotton, speculative buying and a rally in oil prices fuelled the gains in rates for the fibre over the last couple of months, analysts said. The most active ICE cotton contracts for March expiry settled down 0.17 cent, or 0.22 percent, at 78.63 cents per lb on Friday. It traded within a range of 78.22 and 78.93 cents a lb.
"We probably had some profit taking ahead of the long weekend and then we got the weekly export sales number, which showed a marketing year high on shipments, that was very supportive to the market," said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia. The US Department of Agriculture (USDA) reported exports of 276,700 running bales for the week ended Dec. 21, a marketing-year high, which was up 87 percent from the previous week.
However, net sales of 163,700 running bales for 2017/2018 were down 50 percent from the previous week. "2018 looks strong for cotton. It's looking like USDA will have to uptick the demand side and Indian production estimates are coming down. That'll help prices," said Jack Scoville, vice president with Price Futures Group in Chicago.
Dealers lifted a bullish bet by 6,280 contracts to 98,318 contracts in cotton in the week to Dec. 26, the Commodity Futures Trading Commission data showed on Friday. "Given cotton's performance across all of 2017, concern is mounting that index funds will reduce their exposure to cotton futures in 2018," Louis Rose, director of research and analytics at Tennessee-based Rose Commodity, said in a note.
"Index funds tend to buy "losers" and sell "winners" during their annual Jan rebalancing manoeuvres." Total futures market volume rose by 1,787 to 20,615 lots. Data showed total open interest gained 432 to 278,997 contracts in the previous session.
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