Cotton futures rose more than 2 percent to a three-week high on Thursday on Sino-US trade optimism and expectations that the US Department of Agriculture will trim its cotton crop forecasts in next week's monthly supply demand report. The most active cotton contract on ICE Futures US, the second-month December futures, settled up 0.3 cent, or 0.4%, at 61.60 cents per lb.
Earlier in the session, prices rose as much as 2.6% to 62.91 cents, the highest since September 13. "There is the possibility of a tropical disturbance coming into the Gulf of Mexico and we are anticipating a reduction in cotton crop in the next week's supply-demand number," said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia.
The US Department of Agriculture (USDA) is scheduled to release its World Agriculture Supply and Demand Estimates (WASDE) report on October 10. "The anticipation of US and Chinese negotiators renewing the talks ... could develop a framework by which they might buy cotton, is supportive," Brown added. US President Donald Trump said on Thursday a delegation from Beijing would come to the Washington next week for more trade talks.
The United States is one of the world's biggest producers of the natural fiber, while China is the largest consumer. The second-month contract fell about 7% in the previous year and is down about 16% so far this year, predominantly on the protracted tit-for-tat tariff war between the world's two largest economies.
"We likely saw another round of short-covering by speculators ... The trade remains considerably under-hedged at this point compared to other seasons. Fundamentally the market is still bearish in my opinion," said Peter Egli, director of risk management at British merchant Plexus Cotton.
Also helping cotton prices was the USDA's weekly export sales report, which showed that net sales of 177,800 running bales (RB) were up 15 percent from the previous week. Exports, however, fell 12 percent. Total futures market volume rose by 21,811 to 38,943 lots. Data showed total open interest gained 1,443 to 236,401 contracts in the previous session. Certificated cotton stocks deliverable as of October 2 totalled 11,136 480-lb bales, down from 11,306 in the previous session.