NEW YORK (Dow Jones)--Cotton settled at their highest prices levels in more
than two years as buying continues after India banned exports in an already
tight supply picture.
Nearby May cotton on ICE Futures U.S. closed 0.19 cents or 0.2% higher on the
day at 83.04 cents a pound. The close is the highest for cotton on a daily
continuation basis since March 6, 2008. Most-active July ended 0.55 cent or
0.65% higher at 85.15.
India, the world's second-leading cotton exporter, said April 19 it would
cutoff exports effective for an undetermined amount of time. The move is an
effort to alleviate India's high domestic prices.
Traders scrambled to locate more supplies as world stocks are tight. Global
cotton production is expected to fall 14% short of consumption in the marketing
year through July 31, according to the U.S. Department of Agriculture. Demand
is rebounding from a period of slowed economic growth. At the same time poor
harvests this season led to less available supplies than expected.
May cotton hit an intraday high of 84.79, though buying waned and prices
backed off as the session continued.
Uncertainty has surfaced over how India will deal with cotton that has been
sold but not yet shipped from the country. The country's textile minister said
Wednesday that the export target set before the ban will be met. The Indian
government said export contracts that have been registered the ban but not yet
shipped must be revalidated, which may change the schedule for dispatches.
Nonetheless, Analysts said uncertainty lingers amid the unexpected shift in the
market's fundamentals.
Commercial traders like merchants and mills now must locate another source
for their cotton, and many are likely to look to the U.S.
The U.S. is the world's top cotton exporter and No. 3 producer. India, the
No. 2 producer, competes with the U.S. for China's export market. China is the
leading cotton producer, importer and textile manufacturer.
The bulk of remaining U.S. cotton supplies are readily available in ICE
certified stock. The bales are deliverable against May and July ICE futures
contracts. Other contracts represent unharvested crops that will not be
available until the fall. Traders will be watching the May contract as its
delivery period starts Monday.
Traders are also looking to weekly cotton export sales for cues on demand.
The data is scheduled for release at 8:30 a.m. EDT Thursday from U.S.
Department of Agriculture. The data reflects sales made the prior week,
however, and will not be indicative of sales made at current higher levels.
ICE daily cotton stocks increased by 10,236 500-pound bales Tuesday to total
936,997 bales with 48,610 bales awaiting review, according to exchange data.
Close Change Range
May 83.04 +19 pts 82.85-84.79
Jly 85.15 +55 pts 84.82-86.80
Dec 77.02 +17 pts 76.64-77.49