Cotton Prices Should Remain 'Relatively High,' Olam Says

Cotton Prices Should Remain 'Relatively High,' Olam Says

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By Luzi Ann Javier

March 4 (Bloomberg) -- Cotton prices “should remain relatively high” until the next marketing year begins in August as global supply remains tight, Olam International Ltd., one of the world’s top three cotton traders, said today.

“We’re at the end of a tight supply-and-demand situation and the big question mark for the market is what happens with the new crop,” Cliff White, a senior vice president at Olam, said in an interview in Singapore today. “The world is not going to increase its cotton planting as much as demand.”

Cotton prices in New York rose to 84.6 cents a pound on March 1, the highest price in two years, on rising demand from textile mills. The contract for May delivery fell 1.3 percent to 81.86 cents a pound on ICE Futures U.S. at 3:43 p.m. Singapore time.

The Cotlook A Index of prices in Asian ports fell 1.2 percent to 86.05 cents a pound yesterday. The index reflects the average of the five cheapest prices offered at Far East ports.

The index may average 74 cents a pound this season, 21 percent higher than the previous year and up from a February estimate of 72 cents, the International Cotton Advisory Committee, a group of governments of countries producing, consuming and trading the fiber, said in a March 1 report.

Global demand for cotton was forecast to rise to 24.8 million metric tons in the year that starts Aug. 1, compared with the 24.5 million tons estimated last month and 24.1 million tons in the current marketing year, the committee said.

“That means you still have a tight supply-and-demand situation into the new crop,” said White, who is also president of trade body the International Cotton Association. “I don’t think we can afford any crop problems.”

Exporters in India, the world’s second-largest producer and shipper of cotton, plan to more than quadruple shipments in the October-February period from a year earlier to benefit from rising prices, the textiles ministry said yesterday.

Shippers registered to export 5.92 million bales of cotton during the period, compared with 1.32 million bales a year earlier, the ministry said on its Web site.

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