KANSAS CITY (Dow Jones)-U.S. cotton futures jumped to their highest levels in
more than two years Thursday on news of strong exports and continued concerns
about global cotton supplies.
Cotton for nearby October delivery on ICE Futures U.S. rose 1.09 cent, or
1.2%, to settle at 89.24 cents a pound. The session peak of 89.59 cents was the
strongest price on a front-month contract since March 2008. Most-active
December climbed 1.29 cent, or 1.5%, to 86.15 cents.
ICE cotton has gained nearly 20% since mid-July.
While a weakening of the U.S. dollar and widespread gains in commodities
Thursday provided additional support for cotton, analysts said heavy global
demand for the fiber was the main catalyst. U.S. cotton exports totaled 486,200
bales for the week ended Aug. 19, the U.S. Agriculture Department said
Thursday, a bullish number that topped the previous week's strong sales of
461,900 bales.
The export sales were better than many traders and analysts had expected,
said Mike Stevens, an independent cotton broker and analyst based in
Mandeville, La.
News of the jump in exports coincides with ongoing concerns about cotton
production in Pakistan, which has been devastated in recent weeks by massive
floods. The country's cotton output has been cut by 16%, Pakistan's Ministry of
Food and Agriculture said Wednesday. The country, the world's fourth-largest
cotton producer, will import cotton from neighboring India to meet immediate
demand from its textile industry.
Shortfalls in production could create opportunities for additional U.S.
export growth, which could lend further support to cotton prices provided the
global economic picture doesn't deteriorate significantly. Though high prices
have caused growers to plant more of the fiber while consumption strengthened,
world cotton stocks are tight. The USDA cut its estimate of global stocks by
4.3 million bales, or 8.6%, earlier this month to their lowest level since
1996.
The USDA this month also raised its projection of U.S. exports for the
2010-11 crop year to 15 million bales from its July projection of 14.3 million
bales. The U.S. is expected to ship more cotton from a crop that is projected
to be 52% larger than last year's, estimated at 18.5 million bales.
Increased global cotton consumption has been underpinned by rebounding global
economies last year that spurred textile demand. China, the world's largest
cotton importer, is expected to import 12.5 million bales in the 2010-crop
year, up from 11.65 million in the USDA's July estimate.
While the focus remains global, West Texas cotton producers awakened Thursday
to record- or near-record low temperatures in the 40s and low 50s Fahrenheit
Thursday morning, prompting some buying in ICE futures. The brief cold snap
isn't expected to harm the crop, experts said.
"We had a cool period for about four or five hours overnight...but given the
time of year and the forecast for the next week putting temperatures back into
the low 90s for highs and low 60s for lows, there is plenty of opportunity for
the plants to recover," said Roger Haldenby, vice president of operations at
Plains Cotton Growers Inc. in Lubbock, Texas.
The coldest readings--38 to 39 degrees--were in a localized area near
Muleshoe, he said.
Most of the cotton in the High Plains area of West Texas saw higher
temperatures, from 48 to 50 degrees.
Cotton development can suffer from more extended periods of cold weather as
the frigid air slows the maturation of the fiber.
Texas is the largest cotton grower in the nation, and farmers are expected to
produce a record crop this year of 8.8 million bales, a 90% increase from last
year's crop that was hurt by dry conditions in spring and early summer, causing
producers to abandon 30% of planted area, said Sharon Johnson, chief cotton
analyst at First Capitol Group in Atlanta.
