Cotton rose by the exchange maximum, halting a slump from last week’s record, as adverse weather may reduce output this year in China, the biggest user of the fiber.
China’s production may fall to 6.36 million metric tons, down 5.5 percent from a year earlier, according to a report by state researcher Cncotton.com. The Asian nation bought 43 percent of U.S. exports in the week ended Nov. 11, the U.S. Department of Agriculture said today. Cotton prices in New York have surged 71 percent this year as mounting demand in China outpaced dwindling global stocks.
“The fundamentals are reasserting themselves,” said John Flanagan, the president of Flanagan Trading Corp. in Fuquay- Varina, North Carolina. “We’re going to try to go back up to where we were before.”
Cotton for March delivery rose the exchange limit of 5 cents, or 4 percent, to settle at $1.2915 a pound at 2:43 p.m. on ICE Futures U.S. in New York, the biggest gain since Oct. 26. The fiber climbed to a record $1.5195 on Nov. 10.
The U.S. exported 491,382 bales of upland cotton last week, up 14 percent from the previous week and more than double the sales from the same week in 2009, the USDA said.
In a Nov. 9 report, the USDA said demand in China would outpace supply by 17 million bales in the year ending July 31. The nation will import 15 million bales this season, up 38 percent from a year earlier, the agency said.
A bale weighs about 480 pounds, or 218 kilograms.
China Price Controls
China’s cabinet yesterday said the nation may take measures to counter the quickest inflation in two years. Price limits on food and tougher punishments on speculators in agriculture futures are being considered, the China Securities Journal reported, citing an unidentified person.
Cotton is also responding to “weakness in the dollar,” Mike Stevens, an independent trader in Mandeville, Louisiana, said in an e-mail.
The dollar dropped against a basket of major currencies, enhancing the allure of commodities as an alternative investment. The euro rebounded against the greenback on optimism that a bailout for Ireland will ease the region’s debt concerns.
The Thomson Reuters/Jefferies CRB Index of 19 commodities climbed as much as 2.5 percent, after falling for two straight days on concerns that China would take steps to slow its economy.