COMMODITIES-Softs, grains lead the charge on supply worries

* Grains, softs bullish on supply threats, strong demand

* Industrial raw materials also gain ground; gold up  

* Cost pressures drive Chinse steel prices to record

 By Nick Trevethan	

 SINGAPORE, Jan 24 (Reuters) - Commodity markets rose on
Monday, with oil, copper and gold all rallying, but agricultural
products took the vanguard, particularly cotton, which traded at
its upside limit in China and U.S. markets on worries about
supply.	

 U.S. cotton rose to a record high and hit its daily limit
for a second straight session following gains in China's cotton
market, which rose on expectations of higher demand from the
textile industry amid tight supplies. Prices of the fibre were
at their highest since the American Civil War.	

 The key March cotton contract on ICE Futures U.S.
rose 3.2 percent to $1.619 per lb, while Zhengzhou cotton rose 5
percent, supported by expectations of a pick-up in demand from
the textile industry amid tight domestic cotton supply.	

 Low levels of worldwide cotton inventories followed a fall
in prices during the global economic crisis, which discouraged
farmers from planting the fibre. In late 2008 prices fell to the
lowest level since 2001. The production squeeze as demand
recovered saw record prices in the last quarter of 2010 and the
new 2011 year.	

 For a story on India cotton exports: 	

 "The outlook for the cotton industry is phenomenal over the
next three years as (irrigation) dams are overflowing and
there's a world shortage of high quality cotton," said Jeremy
Callachor, chief executive of Naomi Cotton , one of
Australia's largest cotton ginning firms.	

 "Chinese mills are paying record prices and I suspect some
speculators are too," he said.	

 International cocoa prices have also soared on the
back of political turmoil in top producer the Ivory Coast,  
settling at 2,114 pounds per tonne on Friday.	

 On Sunday, Alassane Ouattara, the internationally recognised
president of Ivory Coast, who is locked in a power struggle with
Laurent Gbagbo, called for a month-long ban on cocoa exports
from the world's top grower. 	

 "I would expect a gap up today, when the market opens," said
Ker Chung Yang, investment analyst at Phillip Futures in
Singapore.   	

 "The prices need to reflect the fact that this cocoa
sanction is not something which is normal. At the current
moment, I don't see any resistance for it."  	

 Chicago wheat jumped 1.4 percent to a new 5-1/2 month top as
the market was bolstered by demand for U.S. cargoes amid
shrinking global supplies, while corn gained 0.5 percent on a
forecast of lower-than-expected plantings in the United States.	

 Soybeans rose 0.7 percent after China wrapped up its biggest
ever one-off U.S. soybean purchase last week in a $6.7 billion
deal equivalent to nearly half of last year's total trade during
President Hu Jintao's state visit. 	

 Chicago Board of Trade wheat for March delivery rose
1.4 percent to $8.36 per bushel, after climbing to a high of
$8.39-1/2 a bushel, the highest since August 6. March corn 
added 0.3 percent to $6.59-1/2 a bushel and March soybeans 
gained 0.7 percent to $14.22 a bushel.	

 U.S. crude oil for March delivery rose 30 cents to
$89.41 a barrel, after posting a 2.65 percent loss last week.
ICE Brent crude for March rose 47 cents to $98.07 a
barrel.  	

 "The sentiment is quite positive," said Tetsu Emori, a
Tokyo-based commodities fund manager at Astmax Investments,
referring to signs of economic improvement in Europe and in the
U.S.  	

 Positive sentiment towards developed economies also helped
lift London copper prices rose 1 percent, extending a near
one-percent gain in the previous session, as fears of China
tightening monetary policy faded.	

 But the reluctance of Chinese consumers to pile into the
market ahead of the Lunar New Year meant any gains would
probably be speculatively driven, and not reflect current
physical demand conditions.	

 Three-month copper on the London Metal Exchange rose
$100 to $9,541 a tonne. The metal hit a record high of $9,781
last week. Shanghai's benchmark third-month copper futures
contract rose 1.1 percent to 71,780 yuan.	

 On Thursday, copper prices dipped to $9,281, a $500 fall in
two days on worries that strong Chinese GDP data and a smaller
than expected drop in inflation would force China to tighten
policy. Since then prices have recovered as those worries faded,
but concerns about physical demand linger.	

 "Within China the physical market is weak -- essentially
because Chinese consumers feel prices are too high," a
Singapore-based trader said, adding: "So they will want to go
hand-to-mouth rather than any meaningful restocking."	

 However, rising costs and firm demand sent construction
steel prices in China to record highs. <0#SRB:>	

 The surge in Shanghai rebar prices reflects a higher raw
material cost as well as a pickup in demand, said Graeme Train,
commodity analyst at Macquarie in Shanghai.        "You've certainly got this cost squeeze which is forcing
Chinese steel mills to push prices up, but the fact that you had
a big rundown in inventories at the end of last year and you're
now looking at seasonal restocking activity means that they're
able to force through those prices and get steel rising to high
levels," he said.     Spot gold prices firmed on Monday, regaining some lost
ground after falling for two consecutive days, while holdings in
the SPDR Gold Trust rose for the first time in two weeks.	

 Spot gold rose by 0.5 percent to $1,348.30 an ounce,
after dropping to a two-month low of $1,337.5 on Friday.  

(Source: http://af.reuters.com/article/metalsNews/idAFL3E7CO0JQ20110124)