May 14, 2006	Sunday	Rabi-us-Sani 15, 1427

NEW YORK, May 13: Cotton futures surged on steady speculative buying to close on Friday at a three-week high, as the rally was sparked by bullish figures from a key government crop report, analysts said.

The New York Board of Trade’s July cotton contract sprang up 0.74 cent to settle at 52.05 cents a lb, dealing from 51.50 to 52.15 cents. It was the highest close for cotton on a spot daily basis since ending at 52.55 cents on April 19.

New-crop December surged 0.87 to 56.69 cents.

Distant months increased 0.40 cent to 1.25 cents.

The US Agriculture Department’s monthly supply/demand report forecast 2006/07 cotton consumption at a robust 122 million (480-lb) bales while world production was 7 million lower at 115 million bales.

USDA cut world ending stocks 5.0 million bales from 2005/06 to 47.42 million bales in 2006/07. Imports by China in 2006/07 were pegged at a record 20 million bales and consumption at a massive 51 million bales. The figures were the first attempt by the USDA to look at supply and demand in the 2006/07 marketing year (August/July).

The numbers were far friendlier in December, said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, adding the December contract now seems poised to make a run at 58 cents in the coming weeks.

Mike Stevens of brokers SFS Futures in Mandeville, Louisiana, said the numbers are particularly friendly for cotton because demand from China continues to rise and world ending stocks are falling by such a sharp number.

These are all potentially explosive numbers should crop problems occur (in) any exporting country, Stevens added.

Alan Feild of brokers iamhedge.com in Memphis, Tennessee said there is a strong chance the US cotton crop, estimated by the USDA at 20.7 million bales in 2006/07, will be even smaller, which could cause the US ending stocks to become even tighter than what this report indicates. We’ve gone from a surplus of cotton to a tight tight situation overnight.

Speculative buying powered cotton throughout the session and were held partly in check by trade buying at the top, dealers said.

It was fairly straightforward — the specs buying it up and the trade selling on a scale-up basis, one said.

Brokers Flanagan Trading Corp. sees support in the July cotton contract at 51.60 and 50.80 cents, with resistance at 52.10 and 53.15 cents.—Reuters