Cotton Soars as Growers Can't Ship `Fast Enough' to Meet Chinese Demand

Cotton jumped the most allowed by ICE Futures U.S. for a second day as growers struggled to meet soaring demand in China, the world’s biggest consumer.

Orders for U.S. exports in the year that ends July 31 have more than doubled from a year earlier, Department of Agriculture data show. For the week ended Nov. 25, shipments were up 21 percent from a week earlier, the USDA said. Cotton prices have surged 67 percent in 2010 as U.S. inventories tumbled and demand rose at Chinese textile mills.

“We’re exporting so much cotton we can’t get it out of the country fast enough,” said Louis Barbera, a broker at VIP Commodities in New York. “The physicals are almost all the way committed.”

Cotton futures for March delivery jumped by the exchange limit of 5 cents, or 4.1 percent, to settle at $1.2634 a pound at 3:03 p.m. on ICE in New York, the highest since Nov. 19. Yesterday, the limit was 4 cents. The fiber reached a record of $1.5195 on Nov. 10.

Cotton is the second-best performing commodity in the 19- component Thomson Reuters/Jefferies CRB Index this year, trailing silver’s 70 percent gain. The fiber is heading for its biggest annual gain since 1973. The CRB gauge has climbed 10 percent in 2010.

Photographer: Chip Chipman/Bloomberg

Pima cotton fibers are shown during harvesting on a farm in Wasco, California. Close

Pima cotton fibers are shown during harvesting on a farm in Wasco, California.

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Photographer: Chip Chipman/Bloomberg

Pima cotton fibers are shown during harvesting on a farm in Wasco, California.

U.S. stockpiles have tumbled 75 percent this year, heading for the largest annual decline since at least 2003, when the data begins.

Shipments of U.S. upland cotton totaled 322,977 bales in the week ended Nov. 25, up from 250,700 a year earlier, USDA data showed today. A bale weighs 480 pounds, or 218 kilograms. The U.S. is the world’s biggest exporter.

‘Terrific’ Exports

“Export sales were terrific once again,” Mike Stevens, an independent analyst in Mandeville, Louisiana, said in an e-mail.

China’s cotton deficit will total 17 million bales this year, the USDA said on Nov. 9. The previous year, demand outpaced supply by 18 million bales.

“For the past five years, demand has outpaced production, and it’s just getting bigger and bigger,” Barbera of VIP Commodities said. “There’s a real, real supply problem.”

Prices have also climbed this year amid limited shipments from India, the largest grower after China. Yesterday, India said it would cap shipments of cotton yarn in the year started Oct. 1. The country will decide by Dec. 3 whether it will ease other restrictions on exports of the fiber.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

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

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