2nd December 2010, by Agrimoney.com
Cotton futures set course for a second successive limit up close after strong US export data stoked concerns of tight supplies, as analysts warned of the risk of the fibre being elbowed out of farmers' sowings plans next year.
New York cotton stood at 126.34 cents a pound in late deals, up the maximum 5.0 cents allowed by exchange rules, and a ceiling widened after Wednesday's limit-up close.
The rally, maintaining a strong rebound after the fibre's collapse last month from record highs, reflected in part data showing weekly US export sales of 323,000 running bales, of 500 pounds each, up 21% on the previous week, and keeping the pace of shipments well ahead of historical rates.
Buyers were led by China, where measures to tighten monetary policy have raised fears of weaker demand in many markets, including cotton, of which the country is the top importer.
"Cumulative cotton sales stand at 85% of the US Department of Agriculture forecast for the 2010-11 marketing year versus a five-year average of 50%," the Hightower Report said.
Sales of just 61,000 running bales a week are now needed to reach the USDA forecast for the full crop year, the analysis group added.
The USDA expects America, the world's top cotton exporter, to ship 15.8m 480-pound bales in 2010-11.
Acreage war
The jump in cotton futures also followed a caution from Goldman Sachs that higher cotton prices were needed for the fibre to secure sowings next year, against competition from high-priced corn and soybeans.
"The market cannot afford large production declines in the US," the bank said, forecasting a cotton price of 125 cents a pound in 2011.
"Strong emerging market demand has put the global cotton market in a deficit for the fourth consecutive year."
The near-term December contract, for which the expiry process has liberated it from exchange trading limits, stood 7.9% higher at 139.82 cents a pound.
The rise took the contract's recovery from a low two weeks ago to 26%, but left it short of the record 157.23 cents a pound set earlier in November.
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