Nov. 9 (Bloomberg) -- Cotton futures jumped by the 5-cent exchange maximum to a record after the U.S. Department of Agriculture reduced its estimates for domestic production and inventories.
Output will be 18.42 million bales in the year ending July 31, down 2.4 percent from last month’s projection, after crops in Texas were damaged by adverse weather, the USDA said today. The agency lowered its estimate for world output by 1.2 percent. Prices surged 95 percent this year amid a shortfall spurred by China’s increasing demand.
“It’s as bullish as any report I can remember,” said Mike Stevens, 72, an independent trader in Mandeville, Louisiana. “The big surprise was the cut in the U.S. production.”
Cotton for March delivery rose by the exchange limit of 5 cents, or 3.5 percent, to settle at $1.4711 a pound at 2:56 p.m. on ICE Futures U.S., the highest level since the fiber began trading 140 years ago. The most-active contract rose to a record for the sixth straight session. The May, July and October contracts also rose by the exchange maximum.
Yields in Texas, the largest producing state, will probably drop to 739 pounds (335 kilograms) an acre, down 6.7 percent from 792 pounds estimated in October, the USDA said. Last year, yields averaged 635 pounds.
A hailstorm in Texas damaged unharvested crops last month. As of Nov. 7, 60 percent of Texas cotton and 71 percent of all U.S. cotton was harvested, according to the USDA.
‘Ration Demand’
“The pipeline in the U.S., it’s just too tight,” said Rogers Varner, the president of brokerage Varner Bros. in Cleveland, Mississippi. “The price will have to go to whatever it can to ration demand.”
China, the biggest cotton buyer and user, will produce 30 million bales this season, down 4.8 percent from 31.5 million estimated last month, the USDA said. Last year, the nation produced 32 million bales.
A cold spell and rains damaged crops last month in China, where stockpiles are forecast to fall to 13.22 million bales, a 10 percent decline from 14.72 million estimated last month, the Washington-based agency said.
A bale weighs 480 pounds, or 218 kilograms.
In China, futures for May delivery on the Zhengzhou Commodity Exchange rose to a record for the third straight day, reaching 33,515 yuan a metric ton.
The country faces a shortage of cotton this year and recent soaring prices have been amplified by speculators, China National Radio reported today, citing Zhang Ping, director of the National Development and Reform Commission.
