RPT-Cotton futures rise as U.S. stocks gains trigger automatic buying

Tue Apr 2, 2013 4:38pm EDT

(Repeats to widen distribution)
    * Buy stops seen triggered near 10- and 20-day moving
averages
    * Automatic buying pushes cotton to intraday high
    * Certified stocks near highest levels since June 2010

    NEW YORK, April 2 (Reuters) - ICE cotton gained on Tuesday
as investors returned to buying after pushing the market to the
largest one-day decline in a week and a half on profit-taking
during the previous session, and strong U.S. financial markets
supported prices.
    The most-active May cotton contract on ICE Futures U.S.
 rose 1.48 cents, or 1.7 percent, to settle at 88.87 cents
per pound. 
    U.S. stocks rose, with the Dow Jones Industrial average
 up and S&P 500 near an all-time intraday high.
    The financial markets' gains prompted some "sympathy buying"
of cotton, said Nick Gentile, senior partner of commodity
trading consultancy Atlantic Capital Partners.
    Buying spiked during the morning session in New York as
automatic buy stop orders were triggered near the 10- and 20-day
moving averages, pushing fiber to its intraday high of 89.69
cents, dealers said.
    Cotton posted its largest one-day decline since March 20
during the previous session as investors took profits following
fiber's recent bull run. Prices surged about 18 percent during
the first quarter.
    The steep gains were driven by investments from speculators.
Noncommercial dealers boosted their bullish bets in cotton
contracts to the highest levels in five years last month, though
government data on Friday showed they have dialed back that net
long stance. 
    Trading volumes were heavy on Tuesday, bolstered by the
index fund roll. Total volume reached almost 35,000 lots, nearly
44 percent higher than the 30-day average, preliminary Thomson
Reuters data showed.
    Fiber also found support from recent news that China, the
world's top consumer and producer, would keep sale volumes from
its state reserves steady despite expectations that it would
boost sales in a bid to soften high global prices.
 
    "Fundamentally, the cash price is strong, so there's a
bullish case there," said Ron Lawson, a partner at commodity
investment firm LOGIC Advisors 
    That sense of tightening supplies outside of China has been
seen pushing up New York cotton prices in 2013 after two years
of losses.
    More than half of a record global surplus forecast by the
end of the crop year through July is expected to become part of
China's stocks and is considered unavailable to the global
marketplace.
    Beijing began building its reserves in 2011, paying above
global prices to support local farmers.
    Traders have said that supply tightness in the cash market
has been supporting futures prices, with mills coming in to buy
as prices dip in recent weeks. 
    U.S. export data has been seen as solid, especially in the
face of recent high prices. Last month, the U.S. Department of
Agriculture increased its estimates for global consumption,
citing recent sale and shipment volumes.
    The next monthly supply and demand outlook from the USDA is
due on April 10.
    Despite tight sentiment and the decertification of about
2,160 480-lb bales listed against the exchange, according to ICE
data, certified stocks have been climbing to some of the highest
levels since June 2010. 
    Certified stock levels totaled 424,338 bales on Monday,
exchange data showed. Another 8,623 bales awaited approval by
the USDA on Tuesday.

 (Reporting by Chris Prentice)