Cotton Futures Exceed $1 a Pound for First Time Since 1995 on Supply Risk

Cotton futures exceeded $1 per pound in New York for the first time since 1995 as demand from textile mills outpaced supply, draining global inventories. 

Cotton for December delivery jumped as much as 3.8 percent to $1.0198 per pound and traded at $1.01 at 11:34 a.m. in Singapore. The high was the costliest for the most active contract since June 1995, according to data compiled by Bloomberg. Prices have surged 61 percent in the past year.

Hedge-fund managers and other large speculators increased their net-long positions in New York futures by 2 percent in the week ended Sept. 14, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will advance, outnumbered short positions by 55,939 contracts on ICE Futures U.S., the Washington-based commission said in its Commitments of Traders report.

“There is a real shortage of raw cotton available to mills, be it India, Pakistan or China, ahead of new crop deliveries which obviously don’t come on line in any great volume, really, for another month,” David Watson, Senior Advisor, Markets, at FCStone Australia, said by phone from Sydney.

China, the world’s biggest cotton grower and buyer, may boost imports as low temperatures and rain hurt crop quality and production, five China-based analysts said in a survey this month. The crop may shrink for a second year to between 6.4 million and 6.8 million metric tons, they said. Production tumbled 13 percent to 6.8 million tons last year, according to the China Cotton Association. Heavy rains soaked some open-boll cotton in its final development stage, they said.

India, Pakistan

The harvest in India, the second-largest producer and shipper, may be less than forecast if monsoon rains last longer than normal, according to the Confederation of Indian Textile Industry last week. Production in the year from Oct. 1 may be less than the 32.55 million bales estimated by the Cotton Advisory Board, Confederation Vice Chairman Prem Malik said from Mumbai. Output this year is estimated at 29.5 million bales, according to the board. An Indian bale weighs 170 kilograms.

Pakistan’s cotton imports will almost double to 3.5 million bales in the year ending July 31 from 1.8 million bales a year earlier, the U.S. Department of Agriculture’s attache said in a report posted Sept. 3 on the agency’s website. Production will drop to 8.75 million bales from 9.92 million “because of considerable losses caused by floods,” the agency said. bloomberg.com

Cotton Extends Rally to 15-Year High as Cold Weather Threatens China Crop

Cotton advanced for a fourth day, extending a rally to the highest price in more than 15 years as cold weather threatens the crop in China, the world’s largest user, boosting import demand and tightening global supplies.

December-delivery cotton advanced as much as 0.6 percent to 95.08 cents a pound on ICE Futures U.S. in New York, the highest price since June 1995. The contract traded at 95.06 cents a pound at 9:25 a.m. Singapore time.

Cotton-growing regions in central China “could turn wetter and cooler again early next week,” Telvent DTN Inc. said in a forecast yesterday. The condition of the country’s crop has deteriorated, compared with a year earlier, after low temperatures and prolonged rains delayed planting and crop development, the official Xinhua News Agency said on Sept. 11.

“There’s a concern that global supplies will tighten,” said Chung Yang Ker, an analyst at Phillip Futures Pte. in Singapore. He forecast the price may rise to $1, without citing a timeframe.

Global inventories will fall to 45.4 million bales in the 12 months ending July 31, the lowest level in 14 years, U.S. Department of Agriculture data showed on Sept. 10. A bale weighs 480 pounds (218 kilos).

Cotton may rise to $1.25 a pound by January as supplies dwindle, O.A. Cleveland, a professor emeritus in agricultural economics at Mississippi State University, said yesterday.

Brazil, the world’s fifth-largest exporter, cut the tariff on imports of the fiber to zero from 10 percent from October to May as domestic supplies fall short of demand, Agriculture Minister Wagner Rossi told reporters in Brasilia yesterday.

India, the world’s second-biggest grower, plans to delay registration of export contracts by two weeks until Oct. 1, Textile Secretary Rita Menon said yesterday.

The nation, estimated by the USDA to account for 18 percent of global cotton exports last season, is limiting overseas sales to 5.5 million bales in the year starting Oct. 1 and will impose “prohibitive” duties on shipments more than that amount. 

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net