Luke Mathews at Commonwealth Bank of Australia, forecast that "cotton market may rise further from here", supported by the likelihood of further downgrades to the crop in the US, the top exporter of the fibre.
And Commerzbank said it sees "more and more signs" that the fibre has found a level where it will be supported by investors, after a fall of more than one-half since setting a record high in March.
The statements followed cotton’s revival in the last session from a seven-month low of 93.2 cents a pound, for New York’s best-traded December lot, to close at 100.76 cents a pound – the maximum gain allowed by exchange rules. Trading volumes were also unusually strong.
‘Chance to buy in’
The rebound was an "overdue" response to the dismal production prospects in Texas, America’s top cotton-producing state, where crops have been devastated by the worst drought since records began in 1885, Commerzbank said.
Furthermore speculators had already cleared out their long positions, with net long exposure near a two-year low, meaning limited selling pressure might be expected from short-term investors.
"We could well see brief losses again over the coming weeks, but they should be seen as a chance to buy in," the bank said.
"It seems unlikely, therefore, that the price will dip below the 100-cent mark again, or if it does, this will be just a passing phenomenon."
The thesis found some support too from Keith Brown, president of Georgia-based brokerage Keith Brown & Co, who highlighted the extent of crop losses in Texas, where he had heard of one 80,000-acre co-operative which was set to produce 20,000 bales of cotton.
The average yield in Texas last year was 722 pounds, or 1.5 bales, per acre.
"In Texas, there is going to be more widespread devastation than people understand," Mr Brown told Agrimoney.com.
Technically, if cotton could avoid putting in a new low before the end of the month, "it has got a good chance of trading sideways" until the US Department of Agriculture’s next benchmark Wasde crop report on August 11.
However, Mr Brown also highlighted the influence of world economic prospects on cotton prices, attributing the decline in cotton, as in many other commodities such as crude, to reduced growth hopes.
Indeed, he attributed a weaker performance by cotton on Wednesday, when the December contract dipped 0.08 cents into negative territory in late deals to stand at 100.68 cents a pound, on broader financial market weakness.
"It does depend on what the global economy holds," he said.
"There is more to cotton prices than flat out US supply and demand fundamentals."