"Prices softened from their highs after the release of the US export sales number," said INTL FCStone analysts. The most-active March contract on ICE Futures US rose 0.72 cent, or 1 percent, to settle at 73.35 cents per lb. Prices had earlier hit 73.98 cents, a level not seen since October 23.
US government data showed some 330,000 running bales of Upland and Pima cotton were sold in the week to November 22, which was down about a quarter from the previous week, but up 6 percent from the prior four-week average. While considered a relatively healthy amount, some had expected a bigger total after rumours that China's state-owned strategic reserve had been buying fibres for its stockpile. Accumulated sales for the marketing year which started on August 1 totalled 5.1 million bales, lagging the 8.3 million bales sold by the corresponding period last year, INTL FCStone analysts noted.
Beijing was recently rumoured to have purchased as much as 1 million bales, they said. That would be added to the state's already massive hoard which is expected to breach 34 million bales by end-July 2013 and account for almost half of the world's surplus inventory.
Aside from the data, prices also toppled off early highs in line with the broader commodities after top Republican lawmaker John Boehner quashed earlier hopes that a budget deal could be reached. Boehner said he was "disappointed" after a phone call with Obama on Wednesday night and a meeting with Treasury Secretary Timothy Geithner on Thursday moved the two sides no closer to an agreement to avert the tax hikes and spending cuts that will be triggered at the start of 2013 unless Congress intervenes.
Some $600 billion in spending cuts and tax increases will come into effect on December 31 that could severely affect the US recovery. That would hurt retail sales and in turn damage demand for fibres, analysts say. The market is already concerned by forecasts of a global surplus this year due to bumper crops and slack demand.
Trading volumes were higher, with almost 19,000 lots of March contracts traded. That was double the total of futures traded on Wednesday. "(The buying is) in commodities across the board. Everything got hit hard yesterday. We'll see what happens over the next day or two ahead of the month-end," said Bill Collard, who runs Florida-based commodity brokerage firm the Futures Management Group. Thursday's move higher broke prices out of a month-long narrow trading range of 4 cents and took the market above both short- and long-term moving averages. It also put it on track for a more than 2-percent rise on the month, rising for a second straight month.