May 22 (Bloomberg) -- Cotton prices rose on speculation that demand will climb as mills replenish supplies to meet an increase in textile orders.

Demand in the year that begins Aug. 1 may rise 2.3 percent to 23.265 million metric tons from a year earlier, Cotlook Ltd. said yesterday. Last month, the estimate was 23.09 million. “Recent reports from a number of key raw-cotton consuming markets point to a nascent recovery in spinning activity,” the U.K.-based industry researcher said.

Declines in mill capacity far exceeded slowing consumption, Ron Lawson, a managing director at Lawson/O’Neill Global Institutional Commodity Adivsors LLC in Sonoma, California, said yesterday. “The huge vacuum requires quite a bit of cotton to fill in.”

Cotton futures for July delivery rose 0.33 cent, or 0.6 percent, to 57.11 cents a pound on ICE Futures U.S. in New York. The price climbed 1.4 percent this week.

The commodity has gained 17 percent this year as declines in global production outpaced dwindling demand.

U.S. export sales of upland cotton were higher than expected at 141,144 running bales in the week ended May 14, Sharon Johnson, a senior cotton analyst at First Capitol Group in Atlanta, said yesterday in a report. Shipments of 445,206 bales were the highest in the year that started Aug. 1, she said.

To achieve the annual export target of 12.5 million bales, weekly shipments need to average 236,000 bales in the 11 weeks left in the current marketing year, Johnson said.

Before the holiday weekend in the U.S., speculators and hedge funds are unwinding bets that prices will fall, said John Flanagan, the president of Flanagan Trading Corp. in Fuquay- Varina, North Carolina.

ICE will be closed on May 25 for a public holiday.

The U.S. is the world’s biggest cotton exporter. A running bale weighs 500 pounds, or 227 kilograms.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.

Last Updated: May 22, 2009 14:59 EDT