Cotton Extends Longest Rally in Two Years; Sugar, Cocoa Decline

Cotton futures rose for the seventh straight session, the longest rally in almost two years, on bets that production will drop in the U.S. as demand rebounds in China. Sugar, cocoa and orange juice declined.

Output in the U.S., the world’s largest exporter, may drop to 14 million bales this year from 17 million last season as farmers turn to more profitable crops including corn and soybeans, Rabobank International said today. A smaller crop in China, the largest user, means domestic supply will lag behind demand, the bank said. Prices are up 8.7 percent in January, headed for the biggest monthly gain since February 2011.

“The possibility of lower acres and lower production in the U.S. is bringing in speculative money,” Sid Love, president of Joe Kropf and Sid Love Consulting Services, said in a telephone interview from Overland Park, Kansas.

Cotton for March delivery rose 1.5 percent to 81.66 cents a pound at 11:24 a.m. on ICE Futures in New York, after reaching 81.82 cents, the highest for a most-active contract since since May 10. Prices rallied 6.6 percent in the six previous session.

On Jan. 15, money managers and speculators held long positions, or bets on higher prices, that exceeded shorts by 24,944 futures and options, up 8.8 percent from a week earlier, government data show. Speculators were net-short on cotton as recently as Nov. 27.

Export sales jumped 73 percent in the week ending Jan. 10, with purchases led by China, U.S. Department of Agriculture data show. The agency will update weekly figures tomorrow.

“We anticipate the cotton market will be supported by Chinese imports and that reserve selling will not be a negative factor for prices,” Rabobank said in a report today.

A bale of cotton weighs 480 pounds, or 218 kilograms.

Raw-sugar futures for March delivery fell 0.5 percent to 18.4 cents a pound on ICE, heading for the seventh decline in eight sessions.

Cocoa futures for March delivery fell 1.4 percent to $2,185 a metric ton in New York, after sinking to $2,178, the lowest for a most-active contract since July 18.

Orange-juice futures for March delivery slumped 1.3 percent to $1.141 a pound on ICE.

To contact the reporters on this story: Oliver Renick in Chicago at orenick1@bloomberg.net; Marvin G. Perez in New York at mperez71@bloomberg.net

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

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