Cotton prices surged, capping the biggest weekly gain in 39 years, on mounting concern that exports will be limited from India, the world’s second-largest grower.
Cotton-yarn shipments will be capped at 720,000 metric tons in the year that started Oct. 1 in a bid to stabilize domestic prices and boost supply, the Indian government said Dec. 1. Futures in New York have soared 75 percent this year as demand in China climbed and inventories plunged in the U.S., the top exporter.
“India is unreliable,” said Keith Brown, the president of Keith Brown & Co., a brokerage in Moultrie, Georgia. “We haven’t solved any kind of problem.”
For the third straight day, prices on ICE Futures U.S. rose the most allowed. Cotton for March delivery jumped by the limit of 6 cents, or 4.7 percent, to settle at $1.3234 a pound at 2:56 p.m. in New York, the largest gain since July 2009.
The May and July contracts also advanced by the exchange limit.
This week, the most-active contract jumped 18 percent, the most since July 9, 1971. Cotton rose to a record $1.5195 on Nov. 10.
Cotton has “seen a lot of bullish news with these problems in India this week, and we had some good export sales last week” for U.S. supplies, said Jack Scoville, a vice president at Price Futures Group Inc. in Chicago. “We finished our correction, and we’re off to the races.”
Shipments of U.S. upland cotton totaled 322,977 bales in the week ended Nov. 25, up from 250,684 a year earlier, the U.S. Department of Agriculture said yesterday. A bale weighs 480 pounds, or 218 kilograms. China is the biggest grower and consumer.
U.S. inventories have tumbled 74 percent this year, heading for the largest annual decline since at least 2003, when the data begins. Stockpiles held in warehouses monitored by ICE plunged to 8,910 bales in October, touching at least an eight-year low.
In July, there may be a “crunch” in the market because “we will have exhausted all of last year’s supply and have yet to gather next year’s crop,” Brown of Keith Brown & Co. said. “That’s when the market could get into what I call ‘white heat,’ that’s as hot as it gets to the upside.”
Last month, the USDA predicted that plantings will rise 21 percent to 11.04 million acres in the spring. Wheat and feed grain acreage will decline, the agency said in a Nov. 9 report. In India, production will climb to 26 million bales in the season that began Aug. 1, up 12 percent from a year earlier, the USDA estimates.
Cotton for December delivery rose as much as 12.64 cents, or 9.2 percent, to $1.4998.
“The squeeze that we’re seeing shows that the immediate demand for cotton remains very strong,” said O.A. Cleveland, an analyst at cottonexperts.com in Starkville, Mississippi. “People are fighting over 70,000 bales.”
Last month, Cleveland predicted the contract would jump 20 cents to $1.479 as expiration approached. The last trading day is Dec. 8.
As of today, 697 contracts, or about 72,500 bales, were called for physical delivery, according to the exchange.