Cotton Prices Extend Rally as China Demand Seen Tightening Global Supplies

Cotton climbed to the highest price since touching a record more than a week ago on renewed concern that global supplies are failing to keep pace with demand from China, the biggest consumer.

China imported 390,720 metric tons of cotton in January, 31 percent more than a year earlier, after an 86 percent increase in 2010 to 2.84 million tons, the customs agency said Feb. 24. The National Bureau of Statistics said yesterday that output declined 6.3 percent to 5.97 million tons last year. Prices more than doubled on ICE Futures U.S. during the past six months.

“China wants to import a whole lot of cotton,” said Louis Barbera, a broker at VIP Commodities in New York. “The lack of cotton that we see will not change for the next few months.”

Cotton for May delivery advanced 2.37 cents, or 1.2 percent to settle at $1.936 a pound on ICE Futures U.S. at 2:57 p.m. in New York, after surging the exchange limit of 7 cents to $1.9823. Prices, up 9.2 percent since Feb. 24, reached a record $2.0893 on Feb. 18.

The fiber dropped 5.5 percent last week, the first weekly loss in seven weeks and the biggest drop since November. Cotton’s 34 percent rally since the end of December is the most of the 19 commodities tracked by the Thomson Reuters/Jefferies CRB Index.

“After last week’s drop, funds are returning to the market where supplies are very tight,” said Toshimitsu Kawanabe, an analyst at commodity broker Central Shoji Co.

India Outlook

India’s textile ministry reduced its production forecast by 5 percent because of low arrivals, the Business Standard reported Feb. 27, citing A.B. Joshi, textile commissioner. The country’s output in the 2010-2011 season may be 31.2 million bales, each weighing 170 kilograms (375 pounds), down from the previous estimate of 32.9 million bales, the Standard reported.

For the year that began Aug. 1, the U.S. will be the world’s largest exporter, followed by India, according to the U.S. Department of Agriculture.

On the Zhengzhou Commodity Exchange in China, cotton futures for September delivery advanced 1.7 percent to close at 32,970 yuan ($5,018) a ton. The contract reached a record 34,870 yuan on Feb. 17.

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net.

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

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