* Cotton spikes to highest price since May 2012
* May-March spread widens for sixth straight session
* Certified stocks continue climb to highest since May 2011
By Chris Prentice
NEW YORK, Feb 19 Cotton rose and the March-May
contract spread widened to nine-month highs on Tuesday as
speculators liquidating their long positions moved to the
sidelines and as Chinese buyers returned following the new year.
The most-active May cotton contract on ICE Futures U.S.
settled up 0.94 cent, or 1.1 percent, at 84.13 cents per
pound, after earlier spiking to 84.87 cents, the highest price
since May 2012.
After two weeks of declining prices, fiber prices jumped
amid heavy trading volume on Tuesday. Chinese buyers returned to
the market following the new year, and a speculative sell-off as
the March cotton contract approached expiration dried up.
"With China being back in the saddle, it encouraged traders
to come back in. We got enough of the weak longs out of the
market that the selling wasn't nearly as strong as it was last
week," said Knight Capital cotton specialist Sharon Johnson.
Speculators raised their net long position in cotton futures
and options to the biggest since September 2010 during the five
weeks to Feb. 12.
As the March futures contract nears expiration, with the
first date of delivery set for Feb. 22, any long positions
against the March contract need to be rolled forward unless
buyers want that cotton delivered.
Last week, May superseded March as the most-active contract.
Open interest in the spot contract totaled about 20,000
contracts on Tuesday, compared with open interest of about
127,000 contracts in the benchmark May contract, Thomson Reuters
The May-March spread increased for a sixth straight session,
pushing the premium of the second-month over the spot contract
to 1.95 cents a lb, its highest level in nine months.
A stark rise in certified stock levels has been the primary
driver, analysts said. Exchange stocks reached more than 258,000
480-lb bales on Monday, with another almost 69,000 bales
awaiting review by the U.S. Department of Agriculture, according
to ICE data.
That represented the most certified stocks since May 2011
and a marked increase from 95,000 bales registered at the start
of the year and about 8,000 listed in October 2012.
Fiber also derived support on Tuesday from strong soybean
prices, as U.S. bean prices jumped 3 percent.
Surging bean and corn prices support cotton as they may prompt
U.S. farmers to turn away from fiber in favor of more lucrative
crops and thus decrease cotton supplies.
Even after two straight weeks of losses, cotton prices have
jumped about 10 percent since the start of the year with
increases to nine-month highs coming despite forecasts of record
global surpluses by the end of the crop year.
ICE cotton volumes were heavy on Tuesday with more than
37,000 lots traded, compared with a 250-day average of about
24,000, according to preliminary Thomson Reuters data.
(Reporting By Chris Prentice; Editing by Peter Galloway)