* Plantings intentions expected higher than previous
* Mill buying came in to support cotton off recent lows
* Head-and-shoulders pattern forming - broker
NEW YORK, March 27 Cotton prices inched up on
Wednesday, as merchants and investors hung to the sidelines
ahead of a U.S. government plantings report that may help
determine if fiber's recent rally still has momentum.
The most-active May cotton contract on ICE Futures U.S.
gained 0.49 cent, or 0.6 percent, to settle at 88.53
cents per pound after mixed trading throughout the day.
Cotton prices saw an "inside day" of trading within
yesterday's ranges amid limited volume ahead of the U.S.
Department of Agriculture's plantings report expected on
Thursday, after seeing stronger gains on Monday on expectations
of continued strong demand from China.
"A lot of people are on the sidelines ahead of this planting
intention report," said Ron Lawson, a partner at commodity
investment firm Logic Advisors.
Cotton prices have climbed about 17 percent since the start
of the year, rising to a one-year high earlier this month,
largely driven as speculators boosted their bullish bets in
fiber to the highest levels since 2008.
The steep rally has come despite forecasts of a record
global surplus expected by the end of the crop year through
July, as more than half of that is expected to become part of
China's stocks and are seen as unavailable to the global market.
Beijing began building its reserves in 2011, paying above
global prices to support farmers.
The stockpiling by the world's largest consumer has created
a situation of two perceived supplies, one of global stocks and
a second of global stocks excluding China's. The second has been
seen as tightening.
Prior to the year-to-date gains, cotton saw two years of
falling prices, as lower-priced, synthetic alternatives eroded
demand for natural fiber.
Against that backdrop, U.S. growers have been forecast to
plant 9.02 million acres this year for next year's crop, the
smallest in 20 years, based on the industry's earliest plantings
intention report from the National Cotton Council.
Many traders and growers put that number as low,
particularly given cotton's recent rally.
Thursday's plantings report from the U.S. Department of
Agriculture will offer a more current number of growers'
planting intentions and of what size crop the U.S. may see next
The recent rally in cotton prices is expected to have driven
more U.S. acreage to cotton, Macquarie analysts said in a note
on tightening cotton supplies. The United States is the world's
largest exporter of cotton, and only cotton of U.S. origin is
deliverable against the ICE exchange, the global benchmark
That, plus expectations of more "aggressive" destocking of
Chinese reserves, is making the outlook for this year's crop
less bullish, they said.
China plans to increase sales from state reserves of fiber
in April. The country will continue its stockpiling program into
next year, however.
Physical buying has pushed cotton up from recent lows after
prices fell nearly 6 percent last week, as mills saw the dips as
opportunity to buy, traders said.
Total volume reached just over 17,000 contracts on
Wednesday, about 30 percent below the 30-day average,
preliminary Thomson Reuters data showed.
The May contract appears to be forming a
head-and-shoulders pattern, a bearish chart formation, traders
The head of the pattern at the March 15 peak of 93.93 cents,
left shoulder at the March 8 high of 88.78 cents and right
shoulder at Monday's high of 88.88 cents a lb, Lawson said.
The market may trend toward the neckline value of about
84.41 cents a lb before investors reassess, he said.
(Reporting by Chris Prentice; Editing by Chizu Nomiyama)