-- Chinese benchmark rate decision gives cotton a boost
The benchmark March cotton contract on ICE Futures US rose the 4.00 cents daily limit to finish at $1.4097 per lb, with the session low at $1.3697. It was the highest close for the second position cotton contract in over a month. Total volume traded hit about 12,500 lots, about two-thirds below the 30-day average of 34,500 lots, Thomson Reuters preliminary data showed.
Market sentiment was aided by news that China only raised reserve requirements for banks instead of benchmark interest rates, easing worries of a slowdown in a prime engine of the world's economy. "Everything was based on the Chinese not raising interest rates," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana. China is the world's biggest consumer of cotton. With benchmark interest rates not increasing, traders said that meant cotton consumption in China will remain strong given the robust economic growth rate being posted by the country.
The limit-up close meant cotton ended the day above the session top of $1.4095 set on Friday. "It does portend higher (cotton) prices sooner rather than later," said Stevens. In China, cotton prices went up on Monday with the May cotton futures last done at 27,535 yuan per tonne, up 880 yuan on the day.
The market's attention will soon turn to prospective spring 2011 cotton plantings in countries such as the United States and China. Analytical firm Informa Economics upped its US cotton plantings forecast in 2011 to 12.2 million acres, a 4-year high and nearly 12 percent higher than 2010 cotton sowings of 10.909 million acres. Industry group National Cotton Council will release its survey of potential cotton sowings in February and the USDA will hand out its own potential cotton plantings data on March 31, 2011
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