Cotton Advances to Record, Jumps Daily Limit on Improved Demand Outlook
Cotton prices jumped to a record in New York, gaining by the daily limit for a third session, on speculation that demand will rise as the U.S. economy strengthens.
U.S. growth is accelerating as 2010 ends, with economists, consumers and companies such as General Electric Co. becoming more confident about next year’s outlook. The Thomson Reuters/Jefferies CRB Index of 19 raw materials jumped to the highest level in more than two years, led by gains in cotton, wheat and cocoa.
“It appears everybody wants to own commodities, and cotton is involved in that,” said Sid Love, the president of Joe Kropf & Sid Love Consulting Services LLC in Overland Park, Kansas. Prices are up “on a combination of people trying to do business and speculative buying,” he said.
Cotton for March delivery gained by the exchange limit of 4 cents, or 2.7 percent, to a record $1.5412 a pound at 10:19 a.m. on ICE Futures U.S. in New York. Prices have more than doubled this year, heading for the biggest annual gain since 1973.
Cotton production in India, the world’s second-biggest grower, will be less than previously forecast after excess rainfall hampered harvests in some areas, according to the Cotton Association.
“This is what we call smoke in the mirror,” said Sharon Johnson, a senior analyst at Penson Futures in Atlanta. “We do have some bullish fundamentals, but they are nowhere near what we saw before. We’re up here mainly on technicals.”
Prices can go up another 3 or 4 cents, Johnson said. “Once we turn, we will probably start a slow grind down for two years.”
To contact the reporter on this story: Yi Tian in New York at Ytian8@bloomberg.net.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.
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