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By Debarati Roy and Jae Hur
Dec. 14 (Bloomberg) --Cotton futures rose to a one-month high on concern that global supplies will lag behind demand and India’s output may be lower than estimated.
Prices have surged 91 percent this year, heading for the biggest annual gain since 1973, on signs that growers would struggle to meet mounting demand from China, the biggest user. Output in India may miss the Cotton Advisory Board’s estimate, the Confederation of Indian Textiles Industry said last week.
“Concern about India crop coupled with Chinese demand is helping prices stay strong,” said Chris Kramedjian, a risk- management consultant at FCStone Fibers & Textiles in Nashville, Tennessee. “Also, there is overall bullishness in the market.”
Cotton for March delivery jumped 3.52 cents, or 2.5 percent, to settle at $1.4449 a pound at 2:55 p.m. on ICE Futures U.S. in New York. Earlier, the most-active contract climbed to $1.4597, the highest since Nov. 10. Prices have rallied for five straight sessions.
Output in India, the world’s second-biggest grower and exporter, may reach 30 million bales of 170 kilograms each (375 pounds), compared with 32.5 million bales estimated by the Cotton Advisory Board, the Indian Textile Industry group said.
U.S. Stockpiles
U.S. stockpiles at the end of the marketing year on July 31 will total 1.9 million bales, each weighing 218 kilograms, the lowest level since at least May 1996, the Department of Agriculture said Dec. 10. That’s 14 percent below the November estimate. The U.S. is the world’s biggest exporter.
Inventories held in warehouses monitored by ICE have plunged 72 percent this year. The U.S. crop will total 18.27 million bales in the harvest that farmers are now completing, down from the 18.42 million projected in November, the USDA said Dec. 10. The department cut its estimate for the second straight month. The previous harvest totaled 12.19 million bales.
“Cotton prices have been underpinned by the U.S. forecast for declining stockpiles and China’s rising demand,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul.
Cotton prices in China will probably remain at “high levels” and won’t trade below 25,000 yuan ($3,757) a metric ton, the Cotton Research Institute said, citing a survey of farmers and processors.
Shortages, rising production costs and inflation will support prices, the institute said today on the China Cotton Association’s website. The report was prepared after November surveys of 1,628 farmers in 15 provinces, it said.
The price of seed cotton has increased 75 percent from last season to an average 10.8 yuan per kilogram, the institute said. Cotton futures for September delivery on the Zhengzhou Commodity Exchange rose 2.9 percent to close at 28,030 yuan a ton today.
“The demand for cotton coming out of China is just phenomenal,” O.A. Cleveland, an agricultural economist and a professor emeritus in agricultural economics at Mississippi State University, said today on a conference call organized by Ag Market Network. “They’re very much in the market to buy and replenish” supplies, he said.
--With assistance from William Bi in Beijing and Elizabeth Campbell in Chicago. Editors: Steve Stroth, Daniel Enoch.
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