Cotton Gains to Record, Heads for Biggest Weekly Advance in Three Months

Cotton futures advanced by the daily maximum, heading for the biggest weekly gain in three months, on signs global supplies will remain subdued amid increased demand from China, the world’s biggest consumer.

May-delivery cotton rose 7 cents, or 3.4 percent, to an all-time high of $2.127 a pound at 3:50 p.m. Tokyo Time, gaining for a sixth straight day, the longest winning streak since Nov. 5. The price has risen 15 percent this week, the most since the week ending Dec. 3.

U.S. sales surged 56 percent to 403,341 bales in the week ended Feb. 24 from a week earlier, as shipments increased to China, Turkey and Bangladesh, the U.S. Department of Agriculture said yesterday. Prices have more than doubled in the past year as global supplies trailed demand.

“Export commitments out of the U.S. continue at record pace and due to the razor-thin expected ending stocks, demand must be rationed as there is not enough cotton,” Rabobank International said in a report e-mailed yesterday. “The need to ration demand in a marketplace where mills have demonstrated a willingness to buy high-price fiber will keep values elevated and limit corrections.”

Cotton will average $1.65 a pound in the second quarter, Rabobank said in the report. “While the U.S. cotton planting season is still a month away, the current dry conditions in the South and strong La Nina suggest that soil moisture deficiencies could be an issue,” the bank said.

Prices have risen 47 percent this year, making cotton the best performer among the 19 raw materials on the Thomson Reuters/Jefferies CRB Index. A bale of cotton weighs 480 pounds, or 218 kilograms.

Advance Sales

Cotton buyers have purchased more than 80 percent of the coming harvest from Australia, the fourth-largest shipper, stepping up the pace of advance sales as a shortage pushes prices to a record, according to an industry executive.

The amount of so-called forward sales compares with usual levels of 50 percent to 60 percent at this time, Phill Ryan, a director of the Australian Cotton Shippers Association, said in an interview. “The U.S. is the biggest exporter in the world and they are sold out,” Ryan said March 2 in Canberra.

Global cotton production will rise 11 percent to a record 27.6 million metric tons in the year starting Aug. 1 as prices boost output, the International Cotton Advisory Committee said March 1. U.S. output may reach 4.24 million tons, it said.

The U.S. is forecast to be the largest exporter in 2010-2011, followed by India, Uzbekistan, Australia and Brazil, according to the U.S. Department of Agriculture.

On the Zhengzhou Commodity Exchange in China, cotton futures for September delivery rose 0.4 percent to 32,625 yuan ($4,968) a ton at 2:52 p.m. local time. The contract reached a record 34,870 yuan on Feb. 17.

(Source: http://www.bloomberg.com/news/2011-03-04/cotton-gains-to-record-heads-for-biggest-weekly-advance-in-three-months.html)