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ICE cotton reverses from six-month high as dealers await USDA report
March 7, 2014 / 9:29 PM / 4 years ago

ICE cotton reverses from six-month high as dealers await USDA report

* Prices retreat from day’s high of 93.95 cts/lb

* Monday’s report expected to forecast lower U.S. ending inventories

* Spot contract jumps ahead of expiry, small delivery seen bullish

NEW YORK, March 7 (Reuters) - Cotton futures retreated from August highs on Friday, as a wave of investor buying dried up at key psychological resistance and as dealers squared positions ahead of Monday’s U.S. government supply-demand report.

The benchmark May cotton contract on ICE Futures U.S. eased 0.34 cent, or 0.4 percent, to settle at 91.27 cents a lb.

The second-month ended the week up over 4 percent, the biggest weekly gain since mid-January.

Commodities notched broad gains this week as skittish investors dialed back buying of equities.

The second-month contract hit 93.95 cents a lb, nearing resistance at the key psychological level of 94 cents, after a U.S. jobs report beat expectations.

Prices reversed as dealers booked profits and awaited Monday’s U.S. government supply-demand report.

The U.S. Agriculture Department (USDA) is widely expected to forecast higher exports and lower ending inventories in the world’s top exporter, painting a more bullish outlook for cotton prices in its monthly forecast due on Monday.

“We finally priced in whatever bullishness we’ll see in Monday’s report,” said Sharon Johnson, a cotton specialist with KCG Futures in Georgia.

Speculation that the Chinese government will implement a “processing quota” shot prices to big gains during the previous session, fueling hopes that demand in the top consumer will remain firm ever after Beijing overhauls its stockpiling program.

Total open interest jumped by almost 9,000 lots to 174,791 lots, the highest levels since mid-February on Thursday, exchange data showed on Friday.

The front-month March cotton contract on ICE rallied 1.02 cent, or 1.1 percent, to settle at 91.02 cents a lb ahead of its Friday expiry.

Some 62 contracts, or about 620 bales, were issued for delivery against the contract, ICE data showed on Friday.

“Nobody wanted to make delivery because of the tightness in U.S. fundamentals,” said Johnson. (Reporting by Chris Prentice; Editing by Chizu Nomiyama)

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