US cotton rallied on Monday as bargain hunting and technical support lifted contracts deemed oversold in last week’s market tumble, with analysts saying they expected the resilience to hold despite new bearish crop data. The most-active July cotton contract on ICE Futures US settled up 1.63 cents, or almost 2 percent, at 92.28 cents per lb after Friday’s two-week low at 90.02 cents.
The spot May ICE contract rose 1.89 cents, or also about 2 percent, to finish at 90.91 cents, rebounding from a one-month low of 88.63 cents on Friday. Cotton futures tumbled last week as weekly US government export data indicated that prices at near 2-year highs have crimped demand. But analysts said on Monday there were still many market bulls who felt this year’s price action in US cotton justified the tightness in supply from the world’s largest fiber exporter.
These bulls have also discounted adverse impact from US Department of Agriculture (USDA) figures on Monday showing that 8.0 percent of cotton fields had been planted for the current crop, versus 6 percent around this time a year ago and against 9 percent over a 5-year average. “Last week’s selling was technically overdone as far as some chartists were concerned, so that’s why we’re catching up today,” said Sharon Johnson, seniorcotton analyst at KCG Futures, a division of commodities brokerKnight Capital, in Roswell, Georgia.
The strong pace of export sales this season had stoked concerns over tight nearby supplies in US cotton. Those worries pushed prices up to 97.35 cents a lb, the highest since February 2012, in March, and have kept the market inverted, with nearby prices trading at a premium, since late 2013. The USDA on Wednesday lowered its outlook for US inventories by the end of the 2013/14 crop year at end-July to the lowest level since 1990/91. But market bears point to record world inventories of nearly 97 million bales expected in cotton by the end of July. Most of those stockpiles are expected to be held within China’s reserves due to a government stockpiling program that Beijing launched in 2011.