NEW YORK, May 21: Cotton futures closed soft on Friday but bounced off a fresh three-month low as locals sold then covered short positions while underlying export business and call option buying remained supportive. The New York Board of Trade’s July contract ended 0.10 cent easier at 50.05 cents a lb., trading from 50.75 cents to 49.810 cents, its lowest price since Feb. 25.

New-crop December fell 0.20 cent to 51.75 cents, after moving from 52.60 to 51.75 cents. The rest closed down from 0.22 to 0.07 cent. The early selling came despite Thursday’s weekly US Agriculture Department report that showed total US cotton export sales surged 364,400 (500-lb) running bales, compared with last week’s 55,500 RBs.

Feild noted professional buying of December 60 cent calls, which confer the right to buy cotton at 60 cents if the market price moves above that strike. Traders said news early Friday that China would increase tariffs on a range of its textile exports to reduce the heat in a trade dispute with the United States and European Union was a relief to the market.

So cotton prices are more nearly reflecting supply/demand fundamentals, which many traders contend are supportive. Longer term, analysts said, traders should watch Chinese demand for the 2005/06 marketing year (August/July), with China thought to be a major force behind the earlier spring rally.

Chartists put support in the July contract at 49.80 cents a lb., with resistance at 51.10 and 51.80 cents.—Reuters