U.S. Cotton Supplies to Fall on Stronger Demand From China; Prices Soar

  • USDA cites higher-than-expected Chinese demand for the fiber
  • Projected U.S. inventories trail lowest analyst estimate

A cotton harvest in Texas, on Aug. 23.

Photographer: Eddie Seal/Bloomberg

Cotton futures surged as much as 3.9 percent in New York after the U.S. government made a larger-than-expected cut to its estimate for domestic inventories, citing higher Chinese demand.

Inventories on July 31, 2017 -- the end of the current crop year -- will be 4.3 million bales, the U.S. Department of Agriculture said in a report released Wednesday. That’s 12 percent less than what the agency projected last month and trails the lowest estimate in a Bloomberg survey of analysts. The average estimate was for 4.87 million bales.

The report, which also shows a bigger global gap between consumption and production in 2016-17, is “bullish” for prices, analysts at Rabobank International, including Stefan Vogel, said in an e-mailed report.

Cotton for December delivery rose 2.7 percent to settle at 68.97 cents a pound on ICE Futures U.S.

The price of the most-active futures contract has climbed 9 percent this year on projections that demand will exceed the global crop, leading to a reduction in inventories.

The government raised its estimate for Chinese consumption to 35.5 million bales from 35 million last month (a bale weighs 480 pounds, or 218 kilograms). It also raised its forecast for U.S. exports to 12 million bales from the 11.5 million forecast in September and compared with the 9.15 million shipped last season.

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