Cotton Futures Extend Rally to Record as China Demand Raises Shortage Risk

Cotton futures in New York rose to a record for the fourth straight day as concerns mounted that global demand led by China, the world’s biggest user, will outstrip supplies and reduce inventories.

After a cold spell damaged crops in China last month, the nation may be forced to import more from global stockpiles that already are forecast to drop to a 14-year low. U.S. exports have climbed, and adverse weather may damage crops in India. Cotton prices have more than doubled in the past year.

“The export-sales report of last week shows, yes, there still is demand” after prices surged, said John Flanagan, the president of Flanagan Trading Corp. in Fuquay-Varina, North Carolina.

Cotton for December delivery rose 1.78 cents, or 1.3 percent, to settle at $1.4223 a pound at 3 p.m. on ICE Futures U.S. in New York. Earlier, the fiber reached $1.446, the highest level since the fiber started trading 140 years ago.

The price was up for the sixth straight session, the longest rally since mid-February. The fiber gained 14 percent this week, the biggest such rally since November 2008.

In China, cotton futures for May delivery on the Zhengzhou Commodity Exchange gained as much as the daily limit of 5 percent to a record 31,235 yuan a metric ton.

The U.S., the biggest exporter, shipped 560,798 bales of upland cotton in the week ended Oct. 28, up 20 percent from the average of the previous four weeks, the U.S. Department of Agriculture said yesterday. China purchased 59 percent. A bale weighs 480 pounds, or 218 kilograms.

“Export sales, feeding the seemingly inexhaustible Chinese appetite for cotton, continue abnormally strong,” O.A. Cleveland, an analyst at cottonexperts.com in Starkville, Mississippi, said in a note e-mailed today.

USDA Forecast

Global production is forecast to lag behind demand for a fifth straight year, draining stockpiles, the USDA said on Oct. 8. China will have a production deficit of 18.5 million bales this year, according to the USDA. The agency will update its crop forecast on Nov. 9.

China’s crop may be 2 million bales smaller than the USDA estimated in October, Flanagan said. China is the world’s biggest grower, followed by India.

The latest USDA forecast was released before a hailstorm hit Texas, the largest U.S. growing state, on Oct. 21. The China Meteorological Center said on Oct. 25 that a cold front moving across the nation might hamper the cotton harvest and reduce fiber quality.

Tropical Cyclone 5B strengthened over the Bay of Bengal and was heading toward India’s east coast. The storm was projected to reach hurricane strength and reach land on Nov. 7. It may bring up to 8 inches (20 centimeters) of rain and winds of 80 miles per hour, damaging crops in Andhra Pradesh, said MDA Information Systems Inc., a weather forecaster.

“It’s going to be a big deal for both sugar and cotton,” Donald Keeney, an MDA meteorologist, said today in a telephone interview from Rockville, Maryland. “Cotton has open bolls, so it’s not going to be good at all.”

To contact the reporters on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net; Jae Hur in Tokyo at jhur1@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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