NEW YORK, Feb 25 (Reuters) - U.S. cotton futures surged to
their upside limit late on Friday, after spending most of the
session in negative territory, but brokers said the gains were
made on very light volume initiated by speculative buyers.
March futures, currently in the delivery period which eliminates the price limit, advanced by a greater amount than later-dated contracts.
March cotton ended 10.06 cents, or 5.55 percent, higher at $1.9134 per lb, after shooting to a 10-day peak at $1.9250 a lb reached in a very short span of time.
March volume was a mere 190 lots.
Similarly, benchmark May contracts, which traded sharply lower for most of the session, suddenly advanced by the upside limit of 7 cents, a 3.95 percent increase, to $1.8423.
Volume in May contracts came to 9,375 lots.
Contracts through March 2012 also rallied to their upside limit, with the rest finishing with substantial gains.
Brokers said the initial surge came quickly and on little volume. Trades were said to be executed by one large fund that often speculates in the options market, as many players stood sidelined following the extreme gyrations of recent weeks.
'We jumped 7 cents on approximately 200 futures contracts bought. The point is, we have such thin conditions that if someone has to buy, it will take it up substantially,' said Ron Lawson, Managing Director, of logicadvisors.com.
The first round of buying sent prices up sharply, triggering stop-loss buy orders. That move pulled other buyers into the market who wanted to avoid getting left behind in any rally, driving prices up to their 7 cent limit.
'Today caught everyone off guard. Prices were down most of the day, when one fund, that usually does options spreads, suddenly came in and started buying futures. Purely speculative money that triggering buy stops,' said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
On the fundamental side, Chinese importers were heavy buyers of U.S. cotton overnight, providing underlying support.
At an agricultural conference, a U.S. Department of Agriculture economist forecast that China, already busy scouring the world for cotton, will seek a hefty 20 percent increase in imports of the fiber next marketing year.
Some market participants saw the prediction as another factor with potential to drive cotton prices ever higher, after surging a week earlier to all-time highs.
'It's more that the sellers vacated the market, so any buyers that came in had a big influence on the market,' said Lawson. He added that the trade had sold all that they need to in the market's recent advance (to record levels).
Brokers added that another potential price driver came from a speech delivered by Allenberg Cotton Co, president and CEO Joe Nicosia to the Mid-South Farm and Gin Show, in Memphis.
According to Delta Farm Press, Nicosia told conferees to 'Plant every acre you can to cotton,' citing price projections of $1.30 a lb for new crop cotton.
The December contract closed at its 7-cent upside limit of $1.2274 a lb, up 6.05 percent.
'Plant every acre you can to cotton this spring. Profitability is phenomenal and the marketplace is asking for it,' Nicosia told producers, according to Delta Farm Press.
(Reporting by Carole Vaporean; Editing by Marguerita Choy )
((carole.vaporean@thomsonreuters.com; 1-646-223-6044; Reuters Messaging: carole.vaporean.thomsonreuters.com@reuters.net; nyc.commods.newsroom@reuters.com))
For related news and prices, click on the codes in brackets: ICE cotton futures RELATED NEWS AND OTHER TOPICS All cotton news Grain/oilseed/cotton news Cotlook Daily All commodities news Grains diary Weather news Foreign exchange rates China cotton China's cotton futures NYMEX cotton Keywords: MARKETS COTTON (For help: Click 'Contact Us' in your desk top, click here or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com ; +1 646-223-5546) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
March futures, currently in the delivery period which eliminates the price limit, advanced by a greater amount than later-dated contracts.
March cotton ended 10.06 cents, or 5.55 percent, higher at $1.9134 per lb, after shooting to a 10-day peak at $1.9250 a lb reached in a very short span of time.
March volume was a mere 190 lots.
Similarly, benchmark May contracts, which traded sharply lower for most of the session, suddenly advanced by the upside limit of 7 cents, a 3.95 percent increase, to $1.8423.
Volume in May contracts came to 9,375 lots.
Contracts through March 2012 also rallied to their upside limit, with the rest finishing with substantial gains.
Brokers said the initial surge came quickly and on little volume. Trades were said to be executed by one large fund that often speculates in the options market, as many players stood sidelined following the extreme gyrations of recent weeks.
'We jumped 7 cents on approximately 200 futures contracts bought. The point is, we have such thin conditions that if someone has to buy, it will take it up substantially,' said Ron Lawson, Managing Director, of logicadvisors.com.
The first round of buying sent prices up sharply, triggering stop-loss buy orders. That move pulled other buyers into the market who wanted to avoid getting left behind in any rally, driving prices up to their 7 cent limit.
'Today caught everyone off guard. Prices were down most of the day, when one fund, that usually does options spreads, suddenly came in and started buying futures. Purely speculative money that triggering buy stops,' said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
On the fundamental side, Chinese importers were heavy buyers of U.S. cotton overnight, providing underlying support.
At an agricultural conference, a U.S. Department of Agriculture economist forecast that China, already busy scouring the world for cotton, will seek a hefty 20 percent increase in imports of the fiber next marketing year.
Some market participants saw the prediction as another factor with potential to drive cotton prices ever higher, after surging a week earlier to all-time highs.
'It's more that the sellers vacated the market, so any buyers that came in had a big influence on the market,' said Lawson. He added that the trade had sold all that they need to in the market's recent advance (to record levels).
Brokers added that another potential price driver came from a speech delivered by Allenberg Cotton Co, president and CEO Joe Nicosia to the Mid-South Farm and Gin Show, in Memphis.
According to Delta Farm Press, Nicosia told conferees to 'Plant every acre you can to cotton,' citing price projections of $1.30 a lb for new crop cotton.
The December contract closed at its 7-cent upside limit of $1.2274 a lb, up 6.05 percent.
'Plant every acre you can to cotton this spring. Profitability is phenomenal and the marketplace is asking for it,' Nicosia told producers, according to Delta Farm Press.
(Reporting by Carole Vaporean; Editing by Marguerita Choy )
((carole.vaporean@thomsonreuters.com; 1-646-223-6044; Reuters Messaging: carole.vaporean.thomsonreuters.com@reuters.net; nyc.commods.newsroom@reuters.com))
For related news and prices, click on the codes in brackets: ICE cotton futures RELATED NEWS AND OTHER TOPICS All cotton news Grain/oilseed/cotton news Cotlook Daily All commodities news Grains diary Weather news Foreign exchange rates China cotton China's cotton futures NYMEX cotton Keywords: MARKETS COTTON (For help: Click 'Contact Us' in your desk top, click here or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com ; +1 646-223-5546) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.