Singapore: The strong fundamentals that have lifted cotton futures to a 15-year high could continue into the second quarter of 2011 as growers struggle to meet rising demand.

Even though soaring prices should encourage bigger crops next year, falling stocks in top consumer China, the ongoing impact of deadly floods in number four producer Pakistan and a rapidly recovering global textile industry should keep prices bubbling.

There is also concern about the cotton harvest in number two producer India, where unseasonally long monsoon rains have caused delays in harvest and the government has clamped down on exports.

“Demand could exceed output by 4 million bales this year,” according to analysts at Louis Dreyfus, while the US Department of Agriculture sees global stocks falling further from a 15-year low.

“We've got a significant supply shortage at the moment as we've gone through a number of years where cotton had been losing the global turf war,” said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia.

It became much more attractive for farmers around the world to grow competing crops such as corn and soybeans. We think the supply shortage will continue to win out in the struggle between the bulls and the bears. Tight fundamentals have already helped cotton gain more than 20% in 2010 after a 55% increase last year. ICE Futures key December contract ended 0.88 cent lower at 93.62 cents per lb on Wednesday.