NEW YORK, July 21: Cotton futures rose for a third consecutive session on Friday as fibers continued to get a fillip from the soaring grains market and early, tentative supply fears emerged after exchange stocks sank to February lows.
The gains bucked an otherwise dismal sentiment across commodities and financial markets which were spooked about the euro-zone debt crisis after a Spanish region asked for financial aid on Friday.
The benchmark December cotton contract on ICE Futures US nudged 0.43 per cent higher to settle at 72.94 cents per lb, after hitting an intraday high of 73.29 cents late in the day.
Trading volume was particularly low though at just over 9,000 lots, with some traders sitting on the sidelines unsettled by the range-bound prices over the past three weeks. The most-active contract has been trapped in a 4-cent range since the start of July, but spreads with March have narrowed dramatically reflecting early underlying concern about supplies due to dwindling stocks.
“One of the major factors (in the market) is the disappearance of certificated stocks,” Mike Stevens, an independent analyst in Mandeville, Louisiana, told Reuters.
March’s premium narrowed to just 0.53 cent on Friday from as much as 1.60 cents in mid-June and over 2 cents at the start of June.
Over 5,000 bales were decertificated on Friday, taking ICE exchange stocks to just under 78,000 bales, their lowest level since February and almost half the levels seen in May.
Most traders believe the drawdown is due to shipments to China, but concerns are mounting that inventory may not be replenished before the next crop hits the market later this year.
Sluggish demand from textile mills due to the weak global economy has kept worries in check. Even so narrowing spreads and the drought across in the US Corn belt that has sent soybean prices to record levels on an almost daily basis have unnerved the market.
All-time grain prices will attract plantings away from fiber later in the year.
“There’s a lot of anxiety about what’s ahead,” said Stevens.—Reuters