Cotton: Rally Was Speculative, Demand Is Very Real

The recent speculative surge in cotton fell on Monday, the spot price fell 3.4% to $ 1.9749 a pound. Ruined crops last summer in Australia and Pakistan due to weather patterns cotton upward surge caused peaked on March 7, when it reached its peak with operations in more than a century, $ 2,197 in New York.
Cotton rally can be more. A Bloomberg survey said that cotton was reduced by 51% to $ 1 a pound on Dec. 31. However, demand for the material continues to strengthen worldwide, making it a highly coveted product remains.
The U.S. Department of Agriculture estimated that the production of cotton crops could increase 11% next year (from August 1), compared with a gain of 3% this year.
Farmers are responding by planting more cotton. The Department of Agriculture's Prospective Plantings report on Thursday will offer a snapshot of the U.S. crop conditions. Analysts predict that production will increase most of the world cotton producers of the major this year, and that the U.S. will plant more than 13 million acres of cotton this season, up from 11 million acres last year.
World cotton demand is strong, especially in China, where industry accounts for most of the world demand of raw material. U.S. Cotton exports are almost 40% over the same period last year, according to Bloomberg.
As demand continues, extreme weather patterns can make the expectations of increased production on U.S. farms. "Texas, once the major cotton producing states, has experienced a severe winter drought, which has raised some concerns that the cotton crop may be poor initially, unless returns much-needed moisture this spring," writes Mike Zarembski, senior analyst at OptionsXpress Commodities in a note.
Consumers are slowly recovering from the recession, unemployment claims began to show a reduction of Americans out of work, suggesting that increases in retail prices that they feel the effects of higher cotton prices can not be immediately absorbed by buyers. Personal income rose slightly in February, according to a report released Monday by the Department of Commerce, growing 0.3% to 38.1 billion U.S. dollars, while disposable personal income increased at the same rate to $ 36 billion.
Analysts of the shops that spend heavily on jeans and shirts as Walmart, Gap and Aeropostale have said they expect some pressure from the high price of cotton in the company reports earnings. Gap shares fell 1.1% on Monday at $ 22.31, Wal-Mart was down 0.4% to $ 52.15 and Aeropostale fell 0.7% to $ 24.07.

(Source: http://blogs.forbes.com/heatherstruck/2011/03/28/cotton-rally-was-speculative-demand-is-very-real/)