Cotton Soars by Daily Limit as Supply May Fail to Meet Demand

Cotton futures jumped by the daily maximum allowed by ICE Futures U.S. to a record on signs that global supply will fail to meet rising demand driven by China, the biggest consumer of the fiber.

The March-delivery contract added 5 cents, or 3.2 percent, to $1.6194 a pound at 11:37 a.m. in Tokyo, gaining for a fifth day. The contract advanced 11 percent last week, the most since the period ended on Dec. 3. The price has more than doubled in the past year.

Cotton imports by China surged 86 percent in 2010 from a year earlier as economic growth lifted demand from the textile industry and adverse weather hurt domestic crop quality. The U.S. Department of Agriculture Jan. 12 cut its global-production estimate for the year that began on Aug. 1.

“Cotton was supported by China’s import data and speculation that the country will buy more before the Lunar New Year holidays,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul.

Global output will be 115.46 million bales, 0.1 percent less than expected in December, the USDA said on Jan. 12. The agency raised its consumption forecast 0.3 percent to 116.58 million bales. A bale weighs 480 pounds, or 218 kilograms.

Stockpiles for 2010-2011 are forecast at 9.3 million tons (42.8 million bales), the tightest level since the 1995-1996 season, Luke Mathews, an agricultural commodities strategist at Commonwealth Bank of Australia, said in a report on Jan. 21.

The global cotton stockpile-to-use ratio is forecast at less than 37 percent this season, the least since 1993-1994, Mathews wrote. China, which consumes 40 percent of the world’s cotton, increased imports 38 percent in 2010-2011, Mathews said.

China Imports

Purchases by China were 2.84 million tons last year, the General Administration of Customs said Jan. 21. That’s the largest since 2006, when China bought a record 3.47 million tons, according to Bloomberg News data.

For the year that began Aug. 1, the U.S. is forecast to be the largest exporter followed by India, USDA data show.

September-delivery cotton on the Zhengzhou Commodity Exchange rose 4.6 percent to 32,290 yuan ($4,902) a ton at 10:58 a.m. local time after touching 32,530 yuan, the highest price since Nov. 10.

(Source: http://www.bloomberg.com/news/2011-01-24/cotton-soars-by-daily-limit-as-supply-may-fail-to-meet-demand.html)