NEW YORK (Dow Jones)--Cotton prices leapt almost 4% Tuesday after India said
it would halt exports of the raw fiber.

Most actively traded futures, cotton for July delivery, settled 3 cents, or
3.7%, higher at 84.60 cents a pound on ICE Futures U.S., hitting its
exchange-imposed limit on price fluctuations. This is the highest price for a
most-active contract since March 1. Nearby May cotton also hit its daily limit,
ending up 3 cents, or 3.8%, at 82.85 cents a pound. Prices for May and July
futures reflect the need for cotton in the near term and represent bids on crop
that's already been harvested.

According to a government order, India's Office of Textile Commissioner said
it stopped registering contracts for cotton exports as of Monday. Effectively,
the move will keep some cotton harvested in India out of world markets. It's
also meant to alleviate India's domestic cotton prices, which have surged more
than 25% since October due to poor harvests and expectations for increased
demand from textile manufacturers. Futures, which are a proxy for world prices,
mirrored the rise.

India is the world's second-largest cotton exporter after the U.S. Both
countries are traditionally big suppliers to China, which is the No. 1 producer
and consumer of cotton, as well as the world's biggest textile maker. Now, with
India's ban in place for an indefinite period, China is likely to turn to the
U.S. to augment its supplies.

The U.S. Department of Agriculture estimates world cotton demand will outpace
production by 14% in the year through July 31. The U.S. is expected to export
12 million bales of cotton in that timeframe, though some analysts predict
actual exports will be higher.

The USDA forecasts that U.S. cotton inventories will close out the season at
3 million bales, including physical cotton stockpiles held against futures
contracts. According to exchange operator IntercontinentalExchange Inc., there
were 926,761 bales in these so-called certified stocks as of Monday, with
53,449 bales, each weighing 500 pounds, awaiting review.

"Traders will have to turn to the U.S.," said Ron Lawson, managing director
at Logic Investment Services in Napa Valley, Calif. "The biggest potential pile
[of cotton] in one place is the cert stock."

Delivery against May cotton futures begins Monday.

China may now look to the U.S. for some of the 100,000 metric tons of cotton
it intended to import from India this year, Lawson said.

An anticipated recovery in consumer demand has encouraged retailers to
restock their stripped-down, recession-hit inventories of clothes, bed linens
and socks. Textiles are among the first items cut from shopping lists when
household budgets are tight, but also are among the first added when extra
funds resurface.

ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 1,828 positions Monday to total 183,541, according to
the exchange.

Volume was estimated at 40,574 lots. In options, approximately 9,933 calls
and 9,790 puts traded, according to exchange data.

Close Change Range
May 82.85 +300 pts 79.85-82.85
Jly 84.60 +300 pts 81.60-84.60
Dec 76.85 + 92 pts 75.75-77.07