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Morning Express | TimeMar 23 2009 8:46AM
ICE Cotton Futures Climb as Specs Buy on Inflationary Ideas
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NEW YORK (Dow Jones)--Speculators covered shorts and established some long positions in ICE Futures U.S. cotton Friday amid expectations for ensuing inflation.

May cotton settled 121 points higher at 44.08 cents a pound and the July contract settled up 118 points at 44.93 cents. For the week, May cotton gained 125 points.

May cotton opened stronger and traded sideways in early dealings. Trade selling in order to redeem cotton from the U.S. commodities loan at a profit was exhausted, removing resistance that has capped gains for months. May futures ran to a three-week high at 44.31 cents midday. Futures lightly trimmed gains on late profit-taking ahead of the close.

The 44-cent level basis May has long been a support or resistance point in the front-month contract, so maintaining a range above that level is supportive to the market, said Ron Lawson, managing director at LOGIC Investment Services in Napa Valley, Calif. Funds on the sidelines looking for a place to show gains by the end of the quarter are heading into commodities as the dollar is expected to drop in response to the Federal Reserve's moves announced this week., Lawson said. He noted talk of widely circulated analysts' reports that directed traders to sell following a close at 44.80 cents basis May.

Foreign mill fixation buying continued as the dollar was lower on the week, despite strong cotton prices and the firmer greenback for the day, said Sharon Johnson, senior cotton analyst at First Capitol Group in Atlanta. Trade selling at 8-12 cents above the U.S. Department of Agriculture loan program's adjusted world price could kick back in when more of the physical commodity is needed, Johnson noted.

Cotton will look to outside markets next week for direction, and U.S. row crops will await the May 31 release of the USDA prospective plantings estimates, analysts said.

ICE daily cotton stocks decreased by 3,247 500-pound bales Thursday to total 221,850 bales with 1,664 bales awaiting review, according to exchange data.

ICE cotton open interest increased by 2,900 positions Thursday to total 133,390, according to the exchange.

Volume was estimated 10,476 lots. In options, approximately 1,977 calls and 846 puts traded, according to exchange data

     Close  Change  Range
May   44.08  +121 pts 42.95-44.31
Jly   44.93  +118 pts 43.80-45.19
Oct   47.67  +118 pts 47.67-47.67
Dec   49.24  +114 pts 48.25-49.45
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