Cotton prices closed
above 80 cents a pound for the first time in seven months despite doubts over the
sustainability of the rally in the fibre, with Australia & New Zealand Bank
restating a "sell" recommendation.
New York cotton futures
for March delivery closed up 0.7% at 80.48 cents a pound, the best close for
spot contract since June, and its eighth rise in the last nine sessions.
The gains, amid
some improved ideas on both cotton's technical and fundamental pictures,
represented a recovery from early losses, amid a debate among brokers over the
sustainability of the rally.
ANZ took a negative
stance, warning over "subdued" consumption growth, and the prospect
of China ending its state stockpiling programme, which has been undertaken at
prices above those on international markets.
The bank's outlook
compared with somewhat more upbeat comments from Standard Chartered, besides a
forecast from leading broker Keith Brown, of US-based Keith Brown & Co,
that New York's May contract could
hit 90 cents a pound, a gain of more than 10 cents from current
'Demand could fall sharply'
indirectly supported global prices since October through its government
procurement programme, but this accumulation phase will have ended by March,"
ANZ ag commodity strategist Victor Thianpiriya said.
With China having
stockpiled some 10m tonnes of the fibre, a year's supply, Mr Thianpiriya
flagged the "risk that China's demand for imported cotton could fall
sharply at some point in 2013".
Cotton was likely
to trade at 70-80 cent a pound for the rest of the year, with rallies towards
the top end of this trading range "a selling opportunity".
forecast selling cotton through an options spread, of put contracts funded by
an out-of-the-money call option.
'Strong ripple effect'
voiced more upbeat sentiments on Chinese demand, saying this should rise this
year, "underpinned by our expectations of an improvement" in China's
economic growth, which the bank believes bottomed out around September-October.
in demand from China is already having a strong ripple effect," StanChart
analyst Abah Ofon said.
the ground indicate that yarn makers in Bangladesh and Pakistan are buying
significant amounts of Indian cotton to meet higher import orders from China as
textile mills look to blend cheaper imported yarn with old cotton stocks bought
at higher prices."
was contributing to higher US exports too, which hit 339,000 running bales in
the latest week, to January 10, up 36% from the previous four-week average.
"The rally in
cotton prices is largely in line with our bullish view on the market,"
said Mr Ofon, who in early December forecast a rise in values.
to believe that fundamentals in 2013 will contrast sharply with those in 2012
and be supportive of the market," particularly with global cotton sowing
expected to drop too in response to prices which remain at one-third of the
record high reached in 2011."
However, the bank
stuck with a view of prices averaging 75 cents a pound in the current quarter.
cautious in the short term about [prices] until we can see further evidence of
a sustained increase in demand," Mr Ofon said.