Cotton Declines on Supply Outlook; Orange Juice Tumbles

Cotton futures rose to the highest since March after the U.S. Department of Agriculture cut its forecast for domestic production to the smallest in four years, boosting costs for apparel companies including Hanesbrands Inc.

The harvest will be 13.05 million bales this year, down from 13.5 million forecast last month and the smallest in four years, according to the USDA. Analysts on average were expecting 13.69 million, a Bloomberg News survey showed. The USDA also cut its forecasts for output from China and Uzbekistan, saying world production will total 116.38 million bales in 2013-2014, lower than the 118.02 million predicted last month.

Cotton futures have rallied 23 percent this past year, more than any of the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. Farmers from the U.S. to Australia reduced plantings after prices plunged from a record in 2011, while mills boosted purchases in China, the world’s biggest user and importer.

“Everyone expected to see higher U.S. and world production numbers than the USDA came back with,” Gary Raines, the chief economist for fibers and textiles at INTL FCStone in Nashville, Tennessee said by telephone.

Cotton for December delivery advanced 1.3 percent to settle at 90.08 cents a pound at 2:30 p.m. on ICE Futures U.S. in New York, after reaching 90.39 cents, the highest for a most-active contract since March 20. A bale weighs 480 pounds, or 218 kilograms.

The fiber historically accounts for 6 percent of the costs of goods sold by companies focused on basic apparel including T-shirts, undergarments and socks, Chen Grazutis, an analyst at Bloomberg Industries, said in an e-mail. That rose to 14 percent in 2012, after prices surged, he said.

‘Remain Rational’

“Compared to 2011, when cotton surpassed $2 per pound, today’s prices remain rational, and within apparel companies’ comfort zone, especially after most of them raised their merchandise prices since then,” Grazutis said.

About 30 percent of the cotton crop in parts of Georgia, the second-largest U.S. grower, may have been hurt by wet weather, Keith Brown, the president of Keith Brown & Co. in Moultrie Georgia, said in a telephone interview.

“The crop was about two weeks late and now is too humid and hot, and cotton does not like extreme weather,” Brown said. “A lot of cotton is slowly developing, with some plants just knee-high when it should be much higher than that” at this stage of the season, he said.

The area to be harvested will drop to 7.703 million acres from 9.372 million, with top grower Texas showing the biggest decline following drier-than-normal conditions that will prompt farmers to abandon some crops, the government said.

Global stockpiles will total 93.77 million bales at the end of the marketing year, compared with last month’s forecast of 94.34 million, and below the average analysts’ estimate of 94.63 million, according to USDA figures.