Cotton Advances to Record in New York, China on Sustained Supply...

Cotton Advances to Record in New York, China on Sustained Supply Concern

By Jae Hur - Nov 2, 2010 12:06 AM PT

Cotton surged to records from New York to China on concern global demand will outstrip supply after cold weather in China and U.S. storms hurt crops.

Cotton for December delivery advanced as much as 1.9 percent to $1.3176 a pound on ICE Futures U.S. and traded at $1.3116 at 4 p.m. Tokyo time, gaining for a third day.

"Spinning mills are having difficulty securing enough volume, indicating very tight supply," said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. "Mills in China keep importing following higher domestic prices."

The daily trading limit for cotton futures in New York increased to 5 cents a pound today after prices gained by the daily limit of 4 cents yesterday, according to ICE Futures U.S.

Cotton soared 23 percent in October, the biggest monthly gain since June 2007. The price surged 73 percent this year, making it the best-performing commodity on the Thomson Reuters/Jefferies CRB Index.

Futures for May delivery on the Zhengzhou Commodity Exchange gained as much as 2.9 percent from the previous settlement to a record 28,900 yuan ($4,324) a ton before ending the day at 28,770 yuan.

Before last week's cold and wet spell, production in China was already forecast to be 18.5 million bales short of domestic consumption this season, leading to higher imports, U.S. Department of Agriculture data show. Purchases may erode world inventories that the USDA projects will drop to a 14-year low.

China's crop has "struggled all year," according to O.A. Cleveland, an analyst at cottonexperts.com in Starkville, Mississippi, and professor emeritus in agricultural economics at Mississippi State University. Output in Xinjiang province "easily could be 3 million bales less than the USDA estimate," he said yesterday.

China, Texas

The harvest in China will decline to 6.4 million tons in the year that began Aug. 1, down 7.9 percent from a year earlier, said Cotlook Ltd., a research firm based in Birkenhead, England. That forecast was made before the China Meteorological Center said on Oct. 25 that the cold front may hamper harvesting and reduce fiber quality.

Crops in the U.S., the largest exporter, were damaged by a hailstorm in Texas, the biggest state producer.

The harvest in Texas was 45 percent completed as of Oct. 31, up from 37 percent a week earlier, the USDA said yesterday after the close of regular trading. The national tally was 61 percent, up from 53 percent and the five-year average of 44 percent.