Cotton Futures Jump to Highest Price in Two Years
March 1, 2010 Sonja Elmquist
BusinessWeek.com
Cotton futures jumped to the highest price in almost two years, extending a rally that began three weeks ago, on concern that global production will fall short of demand as the economy rebounds.
Consumption of the fiber will total 118.5 million bales next year, compared with output of 113.5 million, eroding inventories, the U.S. Department of Agriculture said Feb. 19. On Feb. 26, commodity researcher FCStone said rain may damage yields in Australia, a day after China said its output will fall 15 percent to 6.4 million metric tons, or 29.4 million bales.
“We’re in severe danger of shortage, particularly if the economy continues to improve,” said Mike Stevens, an independent cotton analyst and trader in Mandeville, Louisiana. Improved prospects for cotton prices have “been apparent since the February supply-and-demand report predicted a severe shortage by spring because of the increased exports.”
Cotton futures for May delivery rose 0.83 cent, or 1 percent, to 83.29 cents a pound on ICE Futures U.S. in New York, after touching 84.6 cents, the highest price for a most-active contract since March 6, 2008. Cotton has jumped 25 percent since Feb. 5 and more than doubled in the past year as demand revived and adverse weather reduced output in the U.S.
Boosting Forecasts
After the close of trading, Morgan Stanley boosted its cotton-price forecasts, saying that the fiber may reach 94 cents a pound during the year that ends July 31, 2013.
“We see inventories continuing to dwindle as cotton demand recovers” and the global economy improves, Hussein Allidina, a Morgan Stanley analyst, said today in an e-mailed report.
The International Cotton Advisory Committee, in a separate report after the close, boosted its estimate of global demand and production from a month ago.
About 24.8 million metric tons will be used in the 2010/2011 marketing year, up from last month’s forecast of 24.5 million and the current-season estimate of 24.1 million, the committee said today in an e-mailed report. Production will rise 9.9 percent to 24.4 million tons in 2011 from 22.2 million a year earlier, the Washington-based group said.
(Story appears in original format here.)
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