Cotton futures ended higher Thursday on modest investor buying on a weaker dollar as the market again kept an eye on tight deliverable supplies in the spot October contract, brokers said. The December cotton contract rose 0.60 cent to close at 76.91 cents per lb, dealing from 76.25 to 77.44 cents.
It was the highest close for the second position contract since July 8, according to Thomson Reuters data. Spot October added 0.11 cent to finish at 80.68 cents. October has a 3.77-cent premium over key December, down from the previous session's premium of 4.26 cents. Volume traded in the December contract stood at 7,954 lots at 2:31 pm EDT (1831 GMT).
The euro sprang to a 12-week high against the dollar, with analysts saying a weaker US unit would normally give a boost to dollar denominated commodities. "I think (the dollar being down) is what's got cotton up," said Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas. He said the market may be hit by end of the week liquidation on Friday and back off to 76 cents.
The market digested the steady decline of US certificated cotton stocks, which stood at 47,793 (480-lb) bales as of July 28, from 50,825 bales on July 27. On June 3, they stood at 1.08 million bales. Cotton stocks are at their lowest level since 2004, according to exchange data.
The October and December cotton contracts are in backwardation as a result. Normally, the front month would be at a discount to the back months, but the situation is reversed in backwardation and the front month runs at a premium.
The market looked at the US Agriculture Department's weekly export sales data which showed total US cotton sales at 237,500 running bales (RBs, 500-lbs each), down from sales last week of 382,000 RBs. The market will next turn its focus on the USDA's weekly crop progress report on Monday. Brokers Flanagan Trading Corp sees support in the December contract at 76.15 and 75.10 cents, with resistance at 77 and 77.90 cents.
Volume traded Wednesday came to 11,973 lots, from the prior tally of 19,356 lots, ICE Futures US data showed. Open interest in the No 2 cotton market was at 164,826 lots as of July 28, compared to the prior 164,498 lots, the exchange said.
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