Dec. 20 (Bloomberg) -- Cotton prices jumped the most allowed by ICE Futures U.S., rising to a record on speculation that demand will rise as the U.S. economy strengthens.
U.S. chief executives polled in the fourth quarter by the Washington-based Business Roundtable were the most optimistic they’ve been in almost five years. The Thomson Reuters/Jefferies CRB Index of 19 raw materials advanced to the highest level in more than two years, led by gains in natural gas, cotton and gasoline.
“It appears everybody wants to own commodities, and cotton is involved in that,” said Sid Love, the president of Joe Kropf & Sid Love Consulting Services LLC in Overland Park, Kansas. Prices are up “on a combination of people trying to do business and speculative buying,” he said.
Cotton futures for March delivery gained by the exchange limit of 4 cents, or 2.7 percent, to close at a record $1.5412 a pound at 2:43 p.m. on ICE in New York. Prices have more than doubled this year, heading for the biggest annual gain since 1973.
“This is what we call smoke in the mirror,” said Sharon Johnson, a senior analyst at Penson Futures in Atlanta. “We do have some bullish fundamentals, but they are nowhere near what we saw before. We’re up here mainly on technicals.”
Prices can go up another 3 or 4 cents, Johnson said.
“Once we turn, we will probably start a slow grind down for two years,” Johnson said.
Production in India, the world’s second-biggest grower, will be less than previously forecast after excess rainfall hampered harvests in some areas, according to the Cotton Association.
Textile mills and merchants who use futures to hedge against risks were buying the March contract to unwind their short positions, pushing prices up, said Chris Kramedjian, a risk-management consultant at FCStone Fibers & Textiles in Nashville, Tennessee.
In the week ended Dec. 14, farmers, mills and other commercial users were net-short 41,231 contracts, down 8.7 percent from the previous week, according to U.S. Commodity Futures Trading Commission data.
