U.S. Cotton Is `Sold Out,' Boosting Australian Sales, Shippers Group Says
Cotton buyers have purchased more than 80 percent of the coming harvest from Australia, the fourth-largest shipper, stepping up the pace of advance sales as a shortage pushes prices to a record, an industry executive said.
The amount of so-called forward sales compared with usual levels of 50 percent to 60 percent at this time, Phill Ryan, a director of the Australian Cotton Shippers Association, said in an interview. “The U.S. is the biggest exporter in the world and they are sold out,” Ryan said yesterday in Canberra.
Cotton traded near a record today on signs global supplies will remain limited amid increased demand from China, helping to drive a surge in farm-commodity prices that’s also included rallies in wheat, corn and soybeans. The most-active May- delivery cotton contract ended yesterday at a 56 percent premium to the December price, indicating a near-term supply squeeze.
“The market is demanding cotton, which is why you have this massive invert,” said Ryan, who’s trading and export manager at Olam International Ltd. (OLAM)’s Queensland Cotton unit. Australia will next month begin shipping the harvest, which will be about a record 4 million bales, he said. Each bale weighs 227 kilograms, or 500 pounds.
The May contract jumped by the daily limit for a fifth day today, rising by as much as 7 cents to $2.076 per pound on ICE Futures U.S. and nearing Feb. 18’s all-time high of $2.0893. The contract for delivery in December, when the next U.S. harvest will be available, traded at $1.2580 at 3:29 p.m. in Singapore.
“Consumers around the world have clearly taken the view that they need to lock in supplies before the market potentially moves higher,” Luke Mathews, commodity strategist at Commonwealth Bank of Australia, said from Sydney today.
Supply Void
There’s a supply void in the market after Australian and South American crops are harvested and before an expected jump in Northern Hemisphere output later this year, Mathews said.
Cotton is the best performer over the past year on the UBS Bloomberg CMCI Index and prices have more than doubled. Sid Love, president of Joe Kropf & Sid Love Consulting Services LLC, said last month that cotton “bulls have gone berserk.”
China purchased more than 40 percent of Australia’s cotton shipments in 2009-2010, while Indonesia and Thailand were the next largest buyers, according to government data. Cotton output in China fell 6.3 percent to 5.97 million metric tons last year, the National Bureau of Statistics said on Feb. 28.
Cotton exports are also in short supply from central Asia and west Africa, and India may not be able to ship more than a flagged 5.5 million bale quantity, Ryan said.
Boost Output
Global production will rise 11 percent to a record 27.6 million tons in the year from Aug. 1 as higher prices prompt farmers to boost output, the International Cotton Advisory Committee said on March 1.
U.S. production may reach 4.24 million tons, the advisory committee said. The U.S. is forecast to be the largest exporter in 2010-2011 followed by India, Uzbekistan, Australia and Brazil, according to the U.S. Department of Agriculture.
Australian production may surge to a record 1.106 million tons for the next crop, which will be planted later this year and harvested in 2012, the Australian Bureau of Agricultural & Resource Economics & Sciences forecast March 1. That’s up from 839,000 tons from this season’s harvest, which was smaller than initially expected after floods in Queensland. The forecast for next year would equate to 4.9 million bales.
Australian production in 2012 would likely gain after rainfall raised the water level in reservoirs, Ryan said, without giving a forecast. The demand to ship cotton out quickly this year would stretch ginning capacity and that could be more of a problem next year, depending on prices, he said.
To contact the reporter on this story: Wendy Pugh in Melbourne at wpugh@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
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